I’ve always said you might as well assume the world is going to work, because if it doesn’t, it doesn’t really matter what your investment portfolio looks like.
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Making time work for you, with steady inflows of permanent capital, really helps investment returns over time.
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I believe pronouncements of a new era will prove to be as misplaced going forward as they have been in the past.
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As an investor in businesses, which generate enormous cash flows, my single most important issue to get right is what management will do with cash flow through reinvestment. Do they care about the owner, or do they care about themselves?
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Markets are all about expectations, and the critical question for investors is always, what is discounted? Are the expectations reflected in market prices too high, or too low?
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Having a long term strategy may seem a quaint idea in a market dominated by high frequency trading, the 24 hour news cycle, the ubiquitous and shrill blogosphere, flash crashes, and where it is repeated as though divinely given that buy and hold is dead.
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It is almost a tautology in capital markets that the best investments are those with the worst previous returns, where expectations are low, demand is down, and prospects appear at best highly uncertain.
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One of the most remarkable things about the investing world is how (correctly) venerated Warren Buffett is and how completely people ignore his investing advice.
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Stocks are the long duration asset, and their level reflects people’s optimism about the future and their attitude toward risk.
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I’ve made so many mistakes over the years that I struggle to isolate just one as the biggest single mistake. Among the choices though I think excessive leverage has been the most personally painful.
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Investing is kind of a game of connecting the dots. The nice thing about it is the longer you are in the business, as long as you are intellectually curious, your collection of data points of dots gets bigger and bigger.
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In order to earn excess returns, one has to anticipate changes in expectations, not react to them.
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One of the things we tell our analysts is, if it’s in the papers, it’s in the price. Meaningful price changes only occur when new, previously unexpected information appears.
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On Wall Street, you have all sorts of people who tell you on October 8, 2013, the Dow Jones will be at 18,225. You’re lucky if they don’t give you the decimals. Of course this is nonsense, nobody knows.
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Bargain prices do not occur when consensus is cheery, the news is good, and investors are optimistic.
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All of the great investing periods begin when things are terrible and end when they are wonderful.
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Rates of return on stocks are a function of three things: beginning dividend yields, growth of earnings, and changes in valuation.
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What I believe will happen in financial markets and what ends up happening have no necessary relationship. The future is uncertain, and the returns investors earn will depend on the nexus of actions taken and how events unfold.
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As is often the case in financial markets, when the opinions are all on one side, the opportunities are usually on the other.
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There are always reasons why the market is down, and those reasons dominate investor’s consciousness; but current fears are reflected in current prices.
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Our memory provides continuity and context to our daily activities, enabling us to recognize familiar situations, see their similarities and differences, integrate experience into a broader context, draw lessons from the past, and so on. Investment memory, though, seems considerably more short-term, selective, and sub-optimal.
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