Money and Finance
- Hussman Weekly Market Comment: A Warning From Graham And Dodd
Link to: A Warning from Graham and Dodd “During the latter stage of the bull market culminating in 1929, the public acquired a completely different attitude towards the investment merits of common stocks… Why did the investing public turn...
- Seth Klarman Quotes On Macro Thinking (1991)
This is from the 1991 Barron’s interview:“One thing I want to emphasize is that, like any human being, we can discuss our view of the economy and the market. Fortunately for our clients, we don't tend to operate based on the view. Our investment...
- Benjamin Graham: Figuring It Out (book Review)
BEFORE Benjamin Graham started to work on Wall Street, investment analysis was a hit-and-miss affair, focusing more on recent price movements than on the merits of individual companies. Graham, a brilliant mathematician, took the process to a much higher...
- Market Valuation, Revulsion, And A Few Things On The Horizon
There are many big picture items in the market that are important, but not all of them are knowable. If one was buying an index fund or investing in the market in a broad fashion, having the information at hand to tell him or her whether the market was...
- Mcgraw-hill Professional To Publish 75th Anniversary Edition Of Graham And Dodd's Security Analysis
Benjamin Graham and David L. Dodd's Security Analysis, first published by McGraw-Hill nearly 75 years ago, forever changed the theory and practice of successful investing. Written in the midst of the Great Depression and in the wake of the 1929 stock...
Money and Finance
Seth Klarman quotes
From the 2008 Graham and Dodd Breakfast (which took place on October 2, 2008):
For years, when someone asked me what my biggest fear was as an investor in managing my portfolio, my answer was that it was buying too soon on the way down from often very overvalued levels. I knew a market collapse was possible. And sometimes, I imagined that I was back in 1930 after the market had peaked the year before, and then dropped 30%. Surely, there would’ve been some tempting bargains then. And just as surely, you’d have been crushed by the market’s subsequent plunge over the next three years — down to below 20% of 1929 levels.
A fall from 70 to 20, and from 100 to 20, would feel almost exactly the same by the time you hit 20. Sometimes being too early becomes indistinguishable from being wrong.
Of course, getting in too soon as the market falls involves great risk for all investors, including value investors. Certainly, when a few securities start to get cheap even as the bull market continues, a value-starved investor will step up and buy them. Soon enough, many of these prove to be no bargain at all, as the flaws that caused them to be rejected by the bulls become more glaringly apparent when the world gets worse.
After a stock market has dropped 30%, there’s no way to tell how much further it might have to go. It’d be silly to expect every bear market to turn into the Great Depression. But it would be equally wrong to expect that a fall from overvalued to more fairly valued couldn’t badly overshoot on the downside.
So when individual stocks reach levels where they are truly undervalued, what are value investors supposed to do other than to buy them? Anything else is market timing. Investors live in real time — not in several year intervals, but in months, days, hours and even minutes.
Because we cannot know the future — and cannot see in the middle of the cycle its end, and not even necessarily its beginning — we will be bombarded by apparent opportunity as the market descends. We will see tempting bargains and value imposters, false rallies and legitimate recoveries, smart bottom fishers and mindless buy-the-dippers — and we will never know until after the fact how low things might go.
We can become macro forecasters, predicting 10 of the next two recessions, or we can ignore the macro economy, buying bargains that cease to look cheap as the economy deteriorates and credit contracts and the tide goes out on all marketable securities.
When a value investor is tempted to become something other than what he or she is, I find it best to recall the wisdom of Graham and Dodd. Graham and Dodd have provided us with a remarkable road map that has been carried on some of the world’s most successful investment journeys for 75 years — a road map that allows us to navigate through difficult, even uncharted, territory and come out ahead.
In a market like we’ve been experiencing, most investors lose their rudders. They become incapacitated, unable to navigate amidst extreme turmoil, declining corporate results, and a litany of economic woes and mounting losses. They become unwilling to part with their cash — afraid of possible redemptions, and afraid of adding to their losses.
Investors today, who are tempted to pull out of the market and wait for some kind of “all clear” signal before recommitting, would be well advised to remember the counsel of Graham and Dodd who wrote in 1934: “While we were writing, we had to combat a widespread conviction that financial debacle was to be the permanent order.” If they could say that then, I must restate it now.
- Hussman Weekly Market Comment: A Warning From Graham And Dodd
Link to: A Warning from Graham and Dodd “During the latter stage of the bull market culminating in 1929, the public acquired a completely different attitude towards the investment merits of common stocks… Why did the investing public turn...
- Seth Klarman Quotes On Macro Thinking (1991)
This is from the 1991 Barron’s interview:“One thing I want to emphasize is that, like any human being, we can discuss our view of the economy and the market. Fortunately for our clients, we don't tend to operate based on the view. Our investment...
- Benjamin Graham: Figuring It Out (book Review)
BEFORE Benjamin Graham started to work on Wall Street, investment analysis was a hit-and-miss affair, focusing more on recent price movements than on the merits of individual companies. Graham, a brilliant mathematician, took the process to a much higher...
- Market Valuation, Revulsion, And A Few Things On The Horizon
There are many big picture items in the market that are important, but not all of them are knowable. If one was buying an index fund or investing in the market in a broad fashion, having the information at hand to tell him or her whether the market was...
- Mcgraw-hill Professional To Publish 75th Anniversary Edition Of Graham And Dodd's Security Analysis
Benjamin Graham and David L. Dodd's Security Analysis, first published by McGraw-Hill nearly 75 years ago, forever changed the theory and practice of successful investing. Written in the midst of the Great Depression and in the wake of the 1929 stock...