If you haven’t already you should read the book in the cover. Written by a well-known Italian climber, explorer, journalist and writer it is an eye-opener and well worth the time. It was published in 2009, just when we were all concerned about financial meltdowns and other much less charming humanly-caused events.
As the two cover images attest, in the span of a little over five months we have come full circle from inebriated optimism to a much somber reality. Official rates are now being estimated to come down with more moderation (some people are beginning to mutter ‘if at all’).
This week, an article in The Financial Times brought reality to the evolving interpretation of the value and function asset liquidity has in portfolio management.
In memory of two giants of the arts and sciences.
Happy Easter to you and your families.
There are few activities more humbling than being a portfolio manager; so much of short-term results depends on pure chance. Yet humility is in very short supply in the business, on both sides: managers and clients. Sometimes a few month or a couple of years of good numbers are hailed as the birth of a new guru or megatrend. Often it all ends in tears almost as quickly as the gestation period.
An old query that never seems to go away. ‘What is the smart money doing these days?’
‘I don’t know; but here’s the thing: knowing what the smart money is doing is equally valuable to knowing what the dumb money is doing, as long as one is always right and the other always wrong.’ [And the dumb money guys are probably cheaper to talk to.]
Recently someone asked me for a stock tip. Immediately I think of two characteristic behaviors of single-stock buyers: the lack of attention for what it is that they are buying, and lack of interest in the management of the enterprise.
Time allows us to deal with price volatility and for compounding to work its magic. Time is what defines investing as such and what distinguishes it from other activities in the market.
There are three reasons the investment management industry cannot consistently produce the desired effects of beating the markets on a large scale (the exceptions exist, though unclear if by skill or luck): the difficulty of predicting the future, the quality of the investment professionals, and accurately determining market expectations (1).
It is comforting to realize that much of the disinformation – intentional or otherwise – we see today is not a new phenomenon.