tag:blogger.com,1999:blog-872609959597709892.post6186319633392963351..comments2015-04-13T04:56:58.603-04:00Comments on TheUnbiasedPortfolio: A discussion on RiskMike Macdonaldhttp://www.blogger.com/profile/13530904393665436991noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-872609959597709892.post-86731502099662530032011-12-18T15:41:35.258-05:002011-12-18T15:41:35.258-05:00Mike, when I read your blog comment above that &qu...Mike, when I read your blog comment above that "Canadian securities regulators are ineffective" I have to admit that based on my experiences with a number of front-line investment industry staff here in Canada, I can't think of even one reason to disagree with you!<br /><br />In fact, after my most recent dealings with a couple of staff from a Canadian investment industry regulator, and seeing their "skills" at regulating and their "knowledge of investing", I could not help remembering these two video clips from two experts in the USA (are Canadian regulators really any different in skill level and investment knowledge than the SEC staff?):<br /><br />Harry Markopolos, frustrated whistleblower in the Bernie Madoff fraud:<br />http://www.youtube.com/watch?v=q1A7LdW0Y_s<br /><br /><br />Bernie Madoff himself:<br />http://www.youtube.com/watch?v=ryE_yHFh6TwAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-872609959597709892.post-47004446457390509532011-12-18T12:15:10.266-05:002011-12-18T12:15:10.266-05:00Thanks for the comment. I think "risk" i...Thanks for the comment. I think "risk" is a catch all for a large range of factors that can alter the expected outcome of an investment. A history of price volatility is a risk factor to me, as are gaps in knowledge as per Mr Buffet. You are very right in saying regulators are using volatility as their risk definition because it is easy to do. I suspect, however, they know exactly what they are doing. They are not lacking in knowledge...they may be lacking in ethics and backbone however.Mike Macdonaldhttps://www.blogger.com/profile/13530904393665436991noreply@blogger.comtag:blogger.com,1999:blog-872609959597709892.post-75130483298288896452011-12-18T10:53:13.364-05:002011-12-18T10:53:13.364-05:00With all due respect to the often-used "in or...With all due respect to the often-used "in order to get higher returns, you need to take higher risk", I'll refer to Warren Buffett's assertion that this is backwards. He says that in order to get higher returns, you need to take less risk...take for example, a stock with a intrinsic value of $40: If you buy it at $20, your risk is lower and your potential return is higher. If you buy it at $60, your risk is higher and your potential return is lower/probable loss is higher. MF Global's actions demonstrate this very clearly! Buffett also says that "risk is not knowing what you are doing".<br /><br />He also has remarked that as long as the business schools use their existing methods to teach students how to invest, he will have no trouble beating the markets!<br /><br />Food for thought!<br /><br />(By the way, volatility is not risk. "Volatility" being re-defined as "risk" is a way for regulators to use paint-by-numbers paperwork -- which is very easy for them to regulate -- to pretend they are doing their job of protecting investors. The reality is regulators know very little about investing and are ill-equipped to protect investors from risk. I have thought many times about how to best regulate the industry, and unfortunately I don't have the solution either...it is a VERY complex industry.)Anonymousnoreply@blogger.com