By Investment Master Class

“I’d be a bum on the street with a tin cup if the markets were always efficientWarren Buffett

“It is hard for me to see how anyone can consider the stock market efficient”  Phil Fisher

“Despite the comfortable academic consensus of market efficiency, financial markets will never be efficient because markets are, and will always be, driven by human emotions: greed and fear”  Seth Klarman

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The Goal Of Investing
CC Investments Masters Class, used with permission

“We believe the efficient market hypothesis is a bunch of crap” Bernay Box

"No, no, no, no, no, no.  No, I do not know most of that stuff [modern portfolio techniques] and do not understand it" Jim Rogers

“My experience makes it difficult for me to believe in the efficient market hypothesis” Jean Marie Eviellard

“Value investors know – although efficient market believers fail to comprehend – that the underlying value of a security is distinguishable from its daily market price, which is set by the whim of buyers and sellers, as are the prices of rare art and other collectibles” Seth Klarman

“I was never a believer that the markets are efficient.” David Einhorn

“I have a name for people who went to the extreme efficient market theory- which is ‘bonkers’. It was an intellectually consistent theory that enabled them to do pretty mathematics. So I understand its seductiveness to people with large mathematical gifts. I just had a difficulty in that fundamental assumption did not tie properly to reality” Charlie Munger

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“Naturally the disservice done students and gullible investment professionals who have swallowed Efficient Market Hypothesis has been an extraordinary service to us. In any sort of a contest – financial, mental or physical – it’s an enormous advantage to have opponents who have been taught that it’s useless to even try” Warren Buffett

"Is there a Nobel Laureate in finance more highly regarded than the Oracle of Omaha? He makes a mockery out of Modern Portfolio Theory by simply proving its relative uselessness with his own results year after year" Frank Martin

"Efficient market theory holds that financial markets are efficient because investors are rational.  They will immediately and accurately assess all available information and act on it, thereby rapidly reflecting it in the pricing of securities.  Conceptually, this picture makes sense.  In practice, it simply doesn't hold up"  Seth Klarman

"Modern financial theory amounts to the belief that hard work, superior insight, and good judgement - the keys to success in the real economy - are ineffectual for the investor in public markets.  It tells the investor: hard work and clear thinking doesn't help here, for now you are in a special place where the quaint rules of Main Street do not apply.  Here all is mystery; your fate is controlled by forces you can never understand. "But", say the masters of the theory, "We understand. Follow us".  Then one day it becomes clear that the masters do not understand, and panic reigns" Andy Redleaf

“The efficient-market-believing professor takes a walk with a student. “Isn’t that a $10 bill lying on the ground” asks the student. “No, it can’t be a $10 bill,” answers the professor. “if it were, someone would have picked it up by now”. The professor walks away, and the student picks it up and has a beer” Howard Marks

"For an astute investor, the worst situation is an “efficient market” for which prices accurately reflect the information. Not to worry – none of us will ever see that” Leon Levy

"Markets aren't fully efficient because humans control its auction-driven pricing mechanism.  Humans are subject to vacillating between extreme fear and extreme greed"  Mohnish Pabrai

"Economic dogmas die hard despite evidence of failure.  Think of all the unnecessary pain and misdirection from the idea of Rational Expectations and the Efficient Market Hypothesis" Jeremy Grantham

"Forget the shibboleth that stocks are going to give you a higher rate of return because they are more risky.  That is not true"  Michael Steinhardt

"Corporate finance is beneath contempt.  Believing just by buying volatile stocks you make an extra 7 percentage points per annum, I mean those people still believe in the tooth fairy and yet it is taught to children"  Charlie Munger

“Beta is deemed to be constant, regardless of price. Because MPT advocates believe that markets are largely efficient – ie the current price is an accurate reflection of the value of the business based on all available information – risk should not be price-related. Speaking of price, in other words, on March 10 2000 when peaked at $162 per share, it was no more risky than its current price of $1.50. That’s where they lost us” Frank Martin

“Some of the best early advice I got was to forget all I’d learned in business school about efficient markets and instead read Ben Graham. You either take to it or you don’t, and I knew right away that this was how I wanted to do it.” Prem Watsa

"In short, we believe market efficiency is a fine academic theory that is unlikely ever to bear meaningful resemblance to the real world of investing"  Seth Klarman

Modern Capital Theory is of little or no help to those involved primarily with making investment decisions – value investors, control investors, most distress investors, credit analysis, and first and second stage venture capital investors” Marty Whitman

“Buffett and his later ego, Charlie Munger have characterized the widely practiced MPT as laughable” Frank Martin

"A whole body of academic work formed the foundation upon which generations of students at the country’s major business schools were taught about Modern Portfolio TheoryEfficient Market Theory and Beta. In our humble opinion, this was a classic example of garbage in/garbage out. One could have just as easily manipulated the data to show that corporations with blue covers on their annual reports performed better than corporations with green covers on their annual reports."  Christopher Browne

"Our universe is the approximately 1,900 companies listed on North American stock exchanges with market capitalisation between $1b and $25b.  Within that range we've found no correlation between market cap and market efficiency. We actually don't consider the market very efficient, period"  Andrew Benton

“Beta and modern portfolio theory and the like – none of it makes any sense to me.” Charlie Munger

"A well established academic doctrine argues that markets are efficient, meaning that the price of a stock fully incorporates all known information and judgement about that stock.  A corollary to this Efficient Market Theory is that nobody can outperform the market over time.  But everything I've seen in my years on Wall Street - and a lot of more current thinking on finance theory - says that that is simply not so" Robert Rubin

“Risk defined as beta - the idea that something is more risky because it’s stock price has gone down and therefore it’s volatility might have increased flies in the face of the core tenets of Graham and Dodd who would say assuming a stable value,  if the stock price is down, there’s less risk in it.” CT Fitzpatrick

“I don’t think Warren Buffett got to going from flipping newspapers to worth $75b if the market was totally efficient.  Whether it’s Mario Gabelli, whether it’s Stan Druckenmiller or Lee Cooperman.  Everyone seems to

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