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Mohnish Pabrai: The difficulty in taking obvious bets

During his recent interview with The Investor’s Podcast, Mohnish Pabrai discusses how to use the Buffett system to grade people, the principles Mohnish lives by and why Buffett and Mohnish (do not) take notes.

Mohnish also talks about a conversation he had with another investor some years back on not investing in high-yield US treasury bonds i the early 1980’ies (quote below).

Okay, you could have bought 30 year U.S. treasuries. In 1980 or 1981, and for 30 years, the US government would pay you 18% a year on that bet. Okay? And he said to me, Mohnish, not only the short Berkshire, I didn’t take that bet. Okay? That 18% be, no. Most people didn’t take that bet. Okay?

And then he said to me, I just want God to gimme one more chance. He said to me, give me one more chance of 18 percent U.S. treasuries and I will put everything in. I promise God I’ll put everything in and I’ll never invest in anything again. So exactly what you were saying is what this guy was saying to me, which would have been smart for him to do.

And that would have been one hell of an investment from 1980 to 2010 to get 18 percent compounded It would be, it would have been unbelievable with no volatility.

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