WID October 2010
Some of the world’s renowned investors when asked what makes them great – the unusual but common answer is “We read and think”. The main goal of WID is to bring our clients the best interviews, articles, research and thought provoking material that we come across, read and thoroughly enjoy. Our collections are old, nevertheless timeless treasures while some are recent and highly recommended.
We thought; why not put these fascinating gems together each month and share the collective wisdom of what we read. WID is our contribution from that inspiring idea. We truly believe - what you read and how much of that you internalize; reflects who you are. We suggest you archive our premium collections; read them and re-read them.
In a series of articles related to “What is risk?” – Bruce Grantier, Brandes Institute writes “Here, I review a recent economics text, This time is different; Eight Centuries of Financial Folly, by Carmen M. Reinhart and Kenneth S. Rogoff. The authors point out that inherent human traits seem to be present in many financial crises. I begin with 1) a discussion of the “this time is different syndrome,” including models of crises, and 2) a review of some examples of behavioral traits in financial crisis and finally 3) a summary of the main types of crises.”
Tilson argues “All of the funds are managed with a value investing approach. We simply apply the timeless principles of Graham and Dodd, practiced today most notably by Warren Buffett and Charlie Munger. We consider these great investors our guides in this business. What does that mean? It means we’re generally not trying to make big macroeconomic prognostications or trying to figure out if a company is going to beat earnings by a penny this quarter and trade around that, but rather we try to calculate the intrinsic value of businesses and then compare that to the value that the stock market is applying to the business in terms of its stock price – and then we seek to buy when there are very large valuation discrepancies.”
Source: The Wall Street Transcript, Aug 23, 2010 www.twst.com
I decided to do an experiment. For one week I would do no multitasking and see what happened. What techniques would help? Could I sustain a focus on one thing at a time for that long? For the most part, I succeeded. If I was on the phone, all I did was talk or listen on the phone. In a meeting I did nothing but focus on the meeting. Any interruptions — email, a knock on the door — I held off until I finished what I was working on.
During the week I discovered six things: First, it was delightful. Second, I made significant progress on challenging projects, Third, my stress dropped dramatically. Fourth, I lost all patience for things I felt were not a good use of my time. Fifth, I had tremendous patience for things I felt were useful and enjoyable. Sixth, there was no downside.
Greg Speicher in his article on ‘How to mitigate risks’ quotes Seth Klarman “For most investments, much can go wrong, including numerous factors beyond an investor’s control: the economy, the markets, interest rates, the dollar, war, politics, tax rates, new technology, labor problems, competition, litigation, natural disasters, fraud, dilution, accounting gimmicks, and corporate mismanagement. Some but not all of these risks can be hedged, often only imprecisely and always at some cost. Other factors are under an investor’s control, but are not always controlled: discipline; consistency; remaining within your circle of competence; matched duration of client capital with underlying investments; prudent diversification; reacting rationally to news or market developments; and of course, not overpaying”
“While the details change, the pendulum-like fluctuation of investment styles is a constant. Fear versus greed, pursuit of safety versus aggressiveness, stocks versus bonds, and growth versus value are just a few examples of the areas in which we see this take place. In this way, the investment world proves the wisdom of Mark Twain’s observation that, “History doesn’t repeat itself, but it does rhyme.”
The limits of the pendulum’s swing are fixed, and it tends to move back and forth over the territory between them. This occurs because (a) people tend to take trends to extremes, (b) neither extreme of the pendulum’s arc represents a perfect or permanent solution, and (c) there’s no place else to go in these regards. Thus the best way to view investment trends may be through an analogy to hemlines: all they can do is go up and down, and so they do. The style mavens call for short skirts, and people fall into line, raising hemlines until they’re as high as they can go.