Risk management & opportunity cost
"hurt us by lowering risk where we should have had it,
and by never letting the fund be aggressive in those areas where I had a view"
Jul 27, 2018 • 13 tweets • 8 min read
Been thinking about drawdowns and how they affect people
Bob Wilson's Resorts International short is a good example
Wilson at the time had $40m of equity, $200m of exposure. Resorts was a $3.5m short
(sources: Killing the Market, Money Masters, WSJ, Wapo)
"considered himself a moneymaking machine" compounded at 35% 1965-1977
Now needed "time out for repairs" - a 6 month round-the-world trip
Negative on the economy but thought the market wouldn't do much
"this is a very stagnant time"
Didn't hide his Resorts short
Jul 27, 2018 • 10 tweets • 5 min read
Richard Heuer’s Psychology of Intelligence Analysis
H/T @MoatsLikeKodak who reminded me of this gem
“to illuminate the role of the observer in determining what is observed and how it is interpreted”
Three fundamental points:
“Mind is poorly wired to deal effectively with inherent and induced uncertainty”
“Increased awareness of biases does little by itself”
“analysis of complex issues can be substantially improved”
Jul 19, 2018 • 11 tweets • 7 min read
Bernard Baruch, My Own Story
"my years in Wall Street became one long course of education in human nature"
"nearly always the problem was .. how to disentangle facts of a situation from the elements of human psychology"
"if there was any 'key' to this process of growing up, it lay in the systematic efforts I made to subject myself to critical self-appraisal"
Jul 16, 2018 • 11 tweets • 8 min read
From Mauboussin's Expectations Investing:
John Burr Williams: The Theory of Investment Value, 1938
Williams makes the case for using the present value of future dividends
"the critical value above which one cannot go in buying or holding without added risk"
Defines an investor as a long-term holder for dividends
Speculator as the holder interested in resale price
"usual buyer is a hybrid, partly investor and speculator"
Jul 15, 2018 • 6 tweets • 4 min read
Here's to the crazy ones, the misfits, the rebels..
Ed Thorp in 1974
"the market is far more interesting than other forms of gambling"
but still a form of gambling :)
"the only better fund was one of those crazy ones invested in only gold stocks"
"the more we can run the money by remote control the better"
Jul 8, 2018 • 17 tweets • 9 min read
This week's article on Einhorn was a good reminder that famous money managers are just people
Personal problems, burnout/motivation, ego/hubris, organizational/business issues - these things matter
Even Soros went through a transformational crisis, back in 1981
from Slater's book:
"like mushrooms, fortunes seem to grow best in the dark"
In June of 1981, Soros appeared on the cover of the Institutional Investor
1981 turned out to be his worst year: down 22.9%, and AUM cut in half
Jun 19, 2018 • 7 tweets • 5 min read
Buffett: calm, "praises by name, criticizes by category"
Also Buffett: gets agitated when talking about iconic 60's manager Jerry Tsai
Kept an "old Moody's showing the holdings" (more than half of which imploded)
"this guy was supposed to be an analyst!"
Tsai was an iconic "performance" (momentum) managers of the 60's
"a shrewd and decisive picker of stocks," he asked Fidelity's Johnson for his own fund
"Go ahead. Here's your rope." (hang yourself with it)
(from The Go-Go Years by Brooks)
May 9, 2018 • 5 tweets • 3 min read
In 1987 Fortune profiled short sellers that had performed surprisingly well during the bull market
Companies won’t talk to you: “It’s as if you were calling up the CEO to ask if someone in his family has AIDS”
“stupendously leveraged, no operating earnings, and a stock price dependent on asset values that were not sustainable”
Also: basketball with the boys every day?
Apr 15, 2018 • 12 tweets • 4 min read
Summer of 1987
Paul Tudor Jones is the “Trader with a Hot Hand”
Apr 8, 2018 • 6 tweets • 2 min read
A 34-year-old Stanley Druckenmiller has weathered the '87 crash and turned bearish on the economy
He is running running $3.2 billion across five different funds
Bearish view expressed: low net exposure (but not net short), arguably low gross exposure, some long bonds
Lagging vs. leading indicators (that said, no recession until 1990..)
Apr 5, 2018 • 8 tweets • 3 min read
You call this a bond bear? Let's take a look at a real bond bear
The 1994 "Bond Massacre"
Clinton: Why are bonds selling off?
Rubin: It's complicated..
Steinhardt: "I just remember losing money and staying up nights and being unable to sell anything at market"
Mar 28, 2018 • 6 tweets • 2 min read
Lampert in the 1990s. Simpler times
It's the 80's and arbitrage is where it's at
Mar 11, 2018 • 6 tweets • 2 min read
When it was just George, Jim, and $20 million AUM
"The Outsiders" in 1975
"if you copy everybody else on Wall Street, you're doomed to do poorly"
"professional money managers are like generals who are always fighting the last war"
Soros' Theory of Reflexivity when it was still called "self-reinforcing moves"
Jan 30, 2018 • 8 tweets • 3 min read
Graham Doddsville Winter 2018
Cooperman bashing Ackman ($ADT)
Sequoia on $GOOG, $CACC
Vulcan Value on $ORCL
Oasis on activism in Japan/China
Pitches: Staples 2025 bond, $FLT, $FDC