Seth Klarman Quotes - Page 6

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• When excesses such as lax lending standards become widespread and persist for some time, people are lulled into a false sense of security, creating an even more dangerous situation. In some cases, excesses migrate beyond regional or national borders, raising the ante for investors and governments. These excesses will eventually end, triggering a crisis at least in proportion to the degree of the excesses. Correlations between asset classes may be surprisingly high when leverage rapidly unwinds.

  Seth Klarman

  Creating, Dangerous Situations, Government

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• It is crucial in a sound investment process to search a mile wide than a mile deep with they find something - also.. never stop digging for information.

  Seth Klarman

  Sound, Digging, Information

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• In a world in which most investors appear interested in figuring out how to make money every second and chase the idea du jour, there's also something validating about the message that it's okay to do nothing and wait for opportunities to present themselves or to pay off. That's lonely and contrary a lot of the time, but reminding yourself that that's what it takes is quite helpful.

  Seth Klarman

  Lonely, Opportunity, Ideas

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• In contrast to the speculators preoccupation with rapid gain, value investors demonstrate their risk aversion by striving to avoid loss.

  Seth Klarman

  Loss, Risk, Aversion

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• 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 strategy is to invest bottom up, one stock at a time, based on price compared to value. And while we may have a macro view that things aren't very good right now - which in fact we feel very strongly we will put money to work regardless of that macro view if we find bargains. So tomorrow, if we found half a dozen bargains, we would invest all our cash.

  Seth Klarman

  Views, Facts, Clients

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• Be focused on process and not outcome

  Seth Klarman

  Outcomes, Process, Focused

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• Most investors are primarily oriented toward return, how much they can make and pay little attention to risk, how much they can lose.

  Seth Klarman

  Risk, Attention, Investing

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• Bad things happen, but really bad things do not. Do buy the dips, especially the lowest quality securities when they come under pressure, because declines will quickly be reversed.

  Seth Klarman

  Quality, Pressure, Dip

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• My experience is that short sellers do far better analysis than long buyers because they have to. The market is biased upward over time-as the saying goes, stocks are for the long run.

  Seth Klarman

  Running, Long, Analysis

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• Do not accept principal risk while investing short-term cash: the greedy effort to earn a few extra basis points of yield inevitably leads to the incurrence of greater risk, which increases the likelihood of losses and severe illiquidity at precisely the moment when cash is needed to cover expenses, to meet commitments, or to make compelling long-term investments.

  Seth Klarman

  Commitment, Loss, Yield

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• Value in relation to price, not price alone, must determine your investment decisions. If you look to Mr Market as a creator of investment opportunities (where price departs from underlying value), you have the makings of a value investor. If you insist on looking to Mr Market for investment guidance however, you are probably best advised to hire someone else to manage your money.

  Seth Klarman

  Opportunity, Decision, Looks

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• Depressions aren't good but the depression mentality is good.

  Seth Klarman

  Mentality

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• Below, we itemize some of the quite different lessons investors seem to have learned as of late 2009 - false lessons, we believe. To not only learn but also effectively implement investment lessons requires a disciplined, often contrary, and long-term-oriented investment approach. It requires a resolute focus on risk aversion rather than maximizing immediate returns, as well as an understanding of history, a sense of financial market cycles, and, at times, extraordinary patience.

  Seth Klarman

  Believe, Long, Focus

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• Ratings agencies are highly conflicted, unimaginative dupes. They are blissfully unaware of adverse selection and moral hazard. Investors should never trust them.

  Seth Klarman

  Agency, Hazards, Moral Hazard

  "The 20 Forgotten Lessons Of 2008". Seth Klarman's annual letter, www.businessinsider.com. April 28, 2010.

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• Always remembering that we might be wrong, we must contemplate alternatives, concoct hedges, and search vigilantly for validation of our assessments. We always sell when a security's price begins to reflect full value, because we are never sure that our thesis will be precisely correct.

  Seth Klarman

  Assessment, Validation, Alternatives

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• You need to balance arrogance and humilitywhen you buy anything, it's an arrogant act. You are saying the markets are gyrating and somebody wants to sell this to me and I know more than everybody else so I am going to stand here and buy it. I am going to pay an 1/8th more than the next guy wants to pay and buy it. That's arrogant. And you need the humility to say 'but I might be wrong.' And you have to do that on everything

  Seth Klarman

  Humility, Guy, Arrogance

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• Value investing by its very nature is contrarian.

  Seth Klarman

  Investing, Values

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• Markets need not be in sync with one another. Simultaneously, the bond market can be priced for sustained tough times, the equity market for a strong recovery, and gold for high inflation. Such an apparent disconnect is indefinitely sustainable.

  Seth Klarman

  Strong, Recovery, Tough Times

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• We work really hard never to get confused with what we know from what we think or hope or wish.

  Seth Klarman

  Confused, Thinking, Insightful

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• Short-term performance envy causes many of the shortcomings that lock most investors into a perpetual cycle of underachievement. Watch your competitors not out of jealousy but out of respect and focus your efforts not on replicating others' portfolios but on looking for opportunities where they are not. The only way for investors to significantly outperform is to periodically stand far apart from the crowd, something few are willing, or able, to do.

  Seth Klarman

  Opportunity, Envy, Focus

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• Beware leverage in all its forms. Borrowers - individual, corporate, or government - should always match fund their liabilities against the duration of their assets. Borrowers must always remember that capital markets can be extremely fickle, and that it is never safe to assume a maturing loan can be rolled over. Even if you are unleveraged, the leverage employed by others can drive dramatic price and valuation swings; sudden unavailability of leverage in the economy may trigger an economic downturn.

  Seth Klarman

  Government, Swings, Fickle

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• Investors need to pick their poison: Either make more money when times are good and have a really ugly year every so often, or protect on the downside and don't be at the party so long when things are good.

  Seth Klarman

  Party, Years, Long

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• Occasionally we are asked whether it would make sense to modify our investment strategy to perform better in today's financial climate. Our answer, as you might guess, is: No! It would be easyfor us to capitulate to the runaway bull market in growth and technology stocks. And foolhardy. And irresponsible. And unconscionable. It is always easiest to run with the herd; at times, it can take a deep reservoir of courage and conviction to stand apart from it. Yet distancing yourself from the crowd is an essential component of long-term investment success.

  Seth Klarman

  Running, Technology, Investment Success

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• The real secret to investing is that there is no secret to investing.

  Seth Klarman

  Real, Secret, Investing

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• When managers are afraid of redemptions, they get liquid. We all saw how many managers went from leveraged long in 2007 to huge net cash in 2008, when the right thing to do in terms of value would have been to do the opposite.

  Seth Klarman

  Opposites, Long, Redemption

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