Investor Series

In this video, I interview Vinod Nair. He is a Managing Partner at Altavista Investment Management. I hope this video will prove to be the first of a useful series. I intend to focus more on content than production values.

Investor Howard Marks on Luck, Risks and the Job that Got Away -- Knowledge@Wharton

In this post, I have picked out a few quotations I found interesting from a K@W post. I hope you will find these nuggets of wisdom as insightful as I do! If you take one thing away, let it be that “Success in investing is not a function of what you buy. It’s a function of what you pay.”

Price is king

Investing is ultimately about buying a company for less than you think it is worth, or at least less than what you think it will be worth in the future. That being said, it is probably best to buy great businesses at great prices, because you can then hold your position 'forever'.

The official dictum was if you were buying the stock of a good enough company, it didn’t matter how high a price you paid.” But it did matter, Marks noted, and people were paying about five times what the stocks were worth. “By 1973, the people who held those stocks had lost 90% of their money.”

Citibank had invested in “the best companies in America and lost a lot of money.” Then it invested in “the worst companies in America and made a lot of money,” Marks noted, adding that “it shouldn’t take you too long to figure out that success in investing is not a function of what you buy. It’s a function of what you pay.”

"Not-Loser's Tennis" & "No-called-strike Baseball"
In investing, you don't need to try to hit a winning shot all the time. You just need to stay in the game long enough, that when a winning opportunity you like presents itself, you can take advantage of it. In fact, you never need to hit that winning shot at all; you could even just stay in till your opponent (the market) makes a mistake. This is why investing is such an advantageous game. 

It’s not a crapshoot like — if you’ll pardon the expression — venture capital, where you invest in 10 companies but if one of them turns out to be Google, you’re a success.”

He plays “not-loser’s” tennis. “If you think you can see the future and the world is going to go according to your decisions, go for winner’s tennis. But if you think the world is full of randomness and uncertainty, spend your time trying to avoid losers.” 

If we can make a large portfolio of investments where none of them [strike out], then we’ll have … no bad ones to pull down the average.”

Self-fulfilling Prophecies
Low business confidence - or fears of a recession - can trigger a recession, and high business confidence can cause a boom. Self-fulfilling prophecies occur regularly on the stock-market. 

Sometimes I think confidence is the only thing that determines economic outcomes. Confidence is largely self-fulfilling.

The Stupidity of Spending the Future Today
Borrowing is simply a means for consuming tomorrow's money today. The thing is, (i) you have to pay for this right, and (ii) there is a chance that tomorrow's money will never materialise!

Credit is one of the reasons the world is in trouble now. Countries like Greece, France, Italy, Portugal and Spain have to practice austerity now because that’s what happens when you spend money you don’t have.