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Happy Hour: Keynes’s Lesson from ’29

December 1, 2017

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Jon

Right from the start, Keynes allocated more money to stocks. That was his first big move as Chairman of National Mutual.

For an insurance company at the time, it was significant. Yet, it was still a small portion of the total funds. The average insurance company at the time held about a 4% allocation to stocks. Keynes bumped it closer to 20%.

And it paid off.

Returns averaged more than 7% after tax from ’21 to ’28. The return on the stock portion exceeded that amount over the same period.

In fact, it worked so well that Keynes offered an annual warning about not expecting consistently good returns year after year: Continue Reading…
John Maynard Keynes on Owning a Larger Portion of Stock

November 29, 2017

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Jon

John Maynard Keynes became the acting Chairman of National Mutual Life Assurance Society in 1921 until his resignation in 1938. Each year, an annual meeting was held in London, where Keynes spoke at length about National Mutual, among other topics.

The time period makes it unique. Britain was recovering from World War I. Markets in Britain and the U.S. were changing. Then the ’29 Crash and Great Depression hit. Of course, we all know how that turned out.

But Keynes didn’t. His speeches offer not only his annual assessment of the events but his thoughts on National Mutual’s investment policy in the midst of it all.

Luckily, The Times of London printed his speeches in full after each annual meeting.

In the very first speech, Keynes lays out the difficulties of investing in an environment with a growing list of new investment “opportunities” and the importance of having an investment policy. Continue Reading…
Happy Hour: Long-Term Thinking

November 17, 2017

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Jon

One of the things that make Amazon stand out from all the competition is the long-term mindset instilled by Jeff Bezos. Another is the companies ability to fail well.

Their willingness to try a lot of things, knowing they’ll fail at most of them, is what drives Amazon’s success. The reason is that the few rare things that don’t fail have a chance at becoming hugely successful because of that long-term mindset.

Jeff Bezos sat for a Summit event last week to discuss, among other things, failure, regret, long-term thinking, and an inventors mindset. His brother moderated the discussion, making it a trip down memory lane for the two of them. Continue Reading…
A Reminder from Peter Lynch

November 15, 2017

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Jon

Since 2009, the stock market returned almost 15% annually. That’s a great return. It’s an even better return considering most people believed it was impossible in 2009…2010…2011…2012…

But that’s how investor perception plays out: either the good times will keep rolling or things will get worse.

Now, the argument can be made that the current bull market hasn’t been running since 2009. If it was 2012, then the market returned about 15% annually. If it was 2016, it’s been about 14% annually.

The sticklers can argue about dates. It’s been a great return…for those who earned it. Continue Reading…
Happy Hour: Mellow Mr. Market

November 10, 2017

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Jon

The Parable of Mr. Market is the most important lessons Graham taught in The Intelligent Investor. It’s a simple story that offers a great way to think about the stock market.

Mr. Market can quote some ridiculous prices from time to time that has nothing to do with the business. You can get caught up in his mood swings, take advantage of him, or ignore him. Mr. Market doesn’t care.

The nice thing about this story is it gets retold all time – usually around market lows – by great investors who add their own twist, which gives you some reflection on the times. So anytime I run across it, I save it.

Seth Klarman told his version in the 2000 Baupost letter following the Dotcom crash: Continue Reading…
Henry Singleton: The Art of Allocation

November 8, 2017

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Jon

Henry Singleton is known as one of the best capital allocators ever. He took advantage of the market’s enthusiasm for Teledyne shares during the late ’60s conglomerate craze to buy up companies.

For example, in 1966, with the stock trading around 40x earnings, he issued shares to buy 20 companies. In 1967, with the stock around 50x earnings, he acquired 30 more. He followed the process of issuing high priced shares to acquire cheaper companies until he acquired over 130 in all.

And when the market turned and Teledyne’s stock sank, he bought all the shares back. Continue Reading…

Happy Hour: Keynes’s Lesson from ’29

John Maynard Keynes on Owning a Larger Portion of Stock

Happy Hour: Long-Term Thinking

A Reminder from Peter Lynch

Happy Hour: Mellow Mr. Market

Henry Singleton: The Art of Allocation