Part of 2 highlights and excerpts from a March 2015 Howard Marks memo on the topic of liquidity: Liquidity During Times of Crisis “‘In times of crisis all correlations go to one.’ The prices of everything move in unison during crises because investors are driven by mob psychology, not fundamentals. Thus – and for the […]
I have been meaning to read Ed Thorp’s new book A Man for All Markets. Short on time in recent weeks, I settled instead for a succinct interview with Thorp in Jack Schwager’s book Hedge Fund Market Wizards. Below are highlights in which Thorp shares his thoughts on position sizing and risk management. Key takeaways: (1) […]
Below are excerpts (Part 4 of 4) from Thirty Years: Reflections on the Ten Attributes of Great Investors by Michael Mauboussin. Psychology, Intrinsic Value, Expected Return What riots & bubbles have in common: “…investing is an inherently social exercise…prices can go from being a source of information to a source of influence. Imagine 100 potential rioters milling […]
Below are excerpts (Part 3 of 4) from Thirty Years: Reflections on the Ten Attributes of Great Investors by Michael Mauboussin. Portfolio Management, Sizing, Psychology “Position sizing and portfolio construction still do not get the attention they warrant.” Preach! “Puggy Pearson was a cigar-chomping gambling legend who won the World Series of Poker and was one […]
There must be something in the Whitebox water supply: it’s producing an army of investment math nerds with acute self-awareness and sensibilities, led by their fearless leader Andy Redleaf. Those of you who have not yet seen Whitebox’s “10 Enduring Principles To Interpret Constant Market Change” are missing out — it is absolutely worth three […]
In our continual search for differentiation in this fiercely competitive investment biosphere, we remain intrigued by the idea of cross-pollination between investment strategies. After all, regardless of strategy, all investors share a common goal: capital compounding through the creation of return asymmetry over time. Fundamental investors often shy away from options and volatility, labeling them […]
This concludes our series on portfolio management highlights from Howard Marks’ book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Chapter 19 “The Most Important Thing Is…Adding Value” Trackrecord, Compounding, Capital Preservation “It means relatively little that a risk taker achieves a high return in a rising market, or that a conservative investors […]
Continuation of portfolio management highlights from Howard Marks’ book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Chapter 18 “The Most Important Thing Is…Avoiding Pitfalls” Risk, Volatility “…trying to avoid losses is more important than striving or great investment successes. The latter can be achieved some of the time, but the occasional failures […]
Continuation of portfolio management highlights from Howard Marks’ book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Chapter 17 “The Most Important Thing Is…Investing Defensively” — a rather apt topic given today’s market environment. Psychology, Capital Preservation, Expected Return, Risk, Opportunity Cost “What’s more important to you: scoring points or keeping your opponent […]
Below are some wonderful bits on bubbles and portfolio construction from James Montier. Excerpts were extracted from a Feb 2014 interview with Montier by Robert Huebscher of Advisor Perspectives – a worthwhile read. Cash, Expected Returns, Exposure “The issue is…everything is expensive right now. How do you build a portfolio that recognizes the fact that cash […]
This concludes our series on portfolio management and Seth Klarman, with ideas extracted from old Baupost Group letters. Our Readers know that we generally provide excerpts along with commentary for each topic. However, at the request of Baupost, we will not be providing any excerpts, only our interpretive summaries. For those of you wishing to […]
The debate on the relationship between volatility, risk, and permanent impairment of capital rages on. Below are some thoughts on the subject from Cliff Asness of AQR Capital Management, extracted from an article titled “My Top 10 Peeves” published earlier this year in the Financial Analysts Journal. “Volatility” Is for Misguided Geeks; Risk Is Really […]
The following is Part 2 of portfolio management highlights extracted from a gem of a Munger speech given at USC 20 years ago in 1994. It’s long, but contains insights collected over many years by one of the world’s greatest investment minds. Caustically humorous, purely Munger, it is absolutely worth 20 minutes of your day […]
Our last article on the uncontrollable nature of luck was just downright depressing. To lift spirits & morale, this article showcases more comforting content on factors that are within an investor’s control. The following excerpts are extracted from a piece by Michael Mauboussin written in 2002 titled The Babe Ruth Effect – Frequency versus Magnitude. […]
Continuation of portfolio management highlights from Howard Marks’ book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Chapter 16 “The Most Important Thing Is…Appreciating the Role of Luck.” Luck, Capital Preservation “We have to practice defensive investing, since many of the outcomes are likely to go against us. It’s more important to ensure […]
Given his reputation and the title of the book, we would be remiss not to feature excerpts from David Swensen’s Pioneering Portfolio Management. Below are portfolio construction & management highlights from Chapter 6: Portfolio Management. The manager anecdotes in this chapter are fairly interesting too, providing readers a window into how an institution (Yale/Swensen) evaluates its […]
I have a confession to make: I have a huge crush on James Montier. I think the feeling might be mutual (see picture below, from a signed copy of his book Value Investing: Tools and Techniques for Intelligent Investment.) Jokes aside, below are some fantastic bits from his recent essay titled “No Silver Bullets.” […]
This is a continuation in our series of portfolio construction & management highlights extracted from Seth Klarman’s Margin of Safety. In Chapter 13 (Portfolio Management and Trading) – Part 3 below, Klarman shares his thoughts on a number of portfolio construction and management topics such as risk management, hedging, and correlation. Portfolio Management, Risk “The challenge of successfully managing an […]
This is a continuation in our series of portfolio construction & management highlights extracted from Seth Klarman’s Margin of Safety. In Chapter 13 (Portfolio Management and Trading) – Part 2 below, Klarman shares his thoughts on the illusory nature of liquidity, and the tricky task of knowing when to sell. Liquidity, Catalyst, When To Buy, When To […]
Many years ago, Seth Klarman wrote a book titled “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.” It is now out of print, and copies sell for thousands on eBay, etc. This marks our first installment of portfolio construction & management highlights extracted from this book. We begin this series not with […]