The Long-Term Expectations Of A High Performing Economy
The standard of living depends on the ability to produce goods and services and is described by the size of Gross Domestic Product (GDP), in total, and per person. The advancement of living standards depends on the “growth” of GDP, which is the combination of population change and productivity change. And “real growth” of GDP […]
What Is Temperament?
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotions under control. You need patience and discipline and an ability to take adversity without going […]
Charlie Munger – The Modern-Day Renaissance Man
“Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.” –Charlie Munger The following is a tribute to Charlie Munger who passed 33 days short of his 100th birthday on November 28, 2023. The term “renaissance man” originates from the Renaissance era where the efforts of […]
Temperament Beats Intellect In Investing
“In the short run, the market is a voting machine but in the long run, it is a weighing machine” Ben Graham Temperament beats intellect is the long-term truth regarding investment success. Temperament includes the ability to; The following visual should further aid in seeing the concept described collectively by Graham and Buffett. Proper investment […]
Long-Term Expectations: The Process Of Professionals Vs Amateurs
“The investor’s chief problem – and even his worst enemy – is likely to be himself” – Ben Graham Ben Graham discussed the difference between amateurs (generally speculators) and professionals (or “true investors”). In the introduction of The Intelligent Investor, Graham explains the predominant process of amateurs being “generalizations and prejudices justified by past history”. […]
Control The Controllable Part 2: Liquidity Risk
“The essence of investment management is the management of risks, not the management of returns.” –Ben Graham Since 1982, the investing world has only experienced declining interest rates – due primarily to low and containedlevels of inflation. Since the Great Financial Recession of 2007-09, the world has largely only experienced quantitative easing and abundant liquidity […]
Control The Controllable
“Forecasts create the mirage that the future is knowable.”–Peter Bernstein The investing year of 2022 shocked most investors with inflationary forces as the primary root cause. Since 1982, the investing world has experienced declining interest rates – due primarily to declining inflationary forces. In addition, the developed markets have become accustomed to high levels of […]
Stress Testing Is Key To Risk Management
“The essence of investment management is the management of risks……not the management of returns” –Ben Graham The current investing environment may be classified as “increasing uncertainty” given high inflation, increased geopolitical conflicts, materially higher interest rates, and potential recession among other headwinds. A successful investment operation will own various securities, assets, and businesses that are […]
Income Investing In A Rising Rate Environment
Interest rates are like gravity in determining the overall stock and bond market valuations. A high interest rate increases the gravitational pull-on valuation. Conversely a low interest rate has less gravitational pull. Translation, higher interest rates equal lower prices and lower interest rates equal higher prices. Since 1982, asset prices have been increasing, due partly […]
The Risk Of High Growth Expectations
Growth Expectations Often Overly Optimistic The analysis of historical growth rates is best illustrated by the McKinsey book “Valuation.” McKinsey categorized all companies into 1 of 5 portfolios depending on their respective growth rate in the base year. As the following exhibit shows, high growth is not sustainable and quickly decays within 5 years, but […]