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"I've Been Investing Since January & I've Never Seen Anything Like It"

Tyler Durden's picture




 

Submitted by Tim Price via Sovereign Man blog,

“I don’t know what to say. I’ve been investing since January and I’ve never seen anything like it.” – Unnamed Hong Kong housewife during the Asian financial crisis of 1997/8.

What follows is a continued personal perspective on some of the challenges facing today’s investor:

1. For many investors, capital preservation in real terms should be more important than capital growth in notional ones.

2. Investors – as humans – are typically loss-averse. We feel the emotional impact of equivalent gains and losses disproportionately. This does not mean we should avoid considered risks, but to invest dispassionately.

3. Investing dispassionately is difficult when most of the investment media comprise the participants in a 24/7 circus. If the business of investing is either entertaining or exciting, you’re doing it wrong.

4. The answer is obvious: turn off CNBC. (Judging by their viewing figures, plenty of investors already have.)

5. True diversification remains the last free lunch in finance.

6. Having fatally tainted monetary policy, the dismal science of economics has wrought damage across investment theory as well: ‘homo economicus’ does not actually exist, and markets will never be wholly efficient until all people are, too.

7. “The investor’s chief problem – and even his worst enemy – is likely to be himself.” (Benjamin Graham)

8. The general principles of investing are not arcane. They should begin with the avoidance of loss.

9. Starting valuation is the most important characteristic of any investment.

10. Risk is poorly defined as volatility. It is better defined as the possibility of a permanent loss of capital.

11. “Operations for profit should be based not on optimism but on arithmetic.” (Also Benjamin Graham)

12. Don’t buy poor quality investments pushed by sell-side interests; don’t overpay for quality investments.

13. The ‘equity / bond / property / cash’ paradigm struggles fundamentally in an environment where all of these asset classes appear overvalued.

14. Friends are unlikely to share their worst investment outcomes at the golf club.

15. Liquidity is overrated. For capital that can be safely committed to the longer term, it is irrelevant.

16. Private investors are often poorly served by the asset management industry.

17. The medical profession has the Hippocratic Oath: first, do no harm. The asset management profession lacks such an explicit expression of fiduciary commitment to its clients.

18. Private investors may, all things being equal, be better served by small, unlisted, private partnerships than by global, publicly listed, full service investment brands.

19. Rising compliance and regulatory pressure reduce variety in the asset management business. This is unlikely to be in the best interests of private investors.

20. When interest rates are close to all-time lows and the printing presses are running, the merits of ‘deep value,’ profitable, well-managed businesses are more than usually compelling – compared to just about any other asset or asset class.

21. Distrust anybody who claims to have all the answers. Especially today.

 

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Wed, 05/28/2014 - 16:03 | 4802874 ebworthen
ebworthen's picture

F.Y.I. - the medical profession has abandoned the Hippocratic oath - in much the same way as the financial engineers have abandoned financial and fiduciary responsibility.

Wed, 05/28/2014 - 16:04 | 4802878 i_call_you_my_base
i_call_you_my_base's picture

America has abandoned ethics.

Wed, 05/28/2014 - 16:14 | 4802902 flacon
flacon's picture

There ain't a whole lot of money left in the system to continue shorting this piece of shit. 

Wed, 05/28/2014 - 16:46 | 4802941 hedgeless_horseman
hedgeless_horseman's picture

 

 

Free lunch? Diversification sucks. It is just another sell-side marketing gimmick. Tell me what is so great about mediocrity? The next thing we know, you will be pitching the Sovereign Man Mutual Fund.

Wed, 05/28/2014 - 17:24 | 4803090 macholatte
macholatte's picture

 

...and I’ve never seen anything like it.”

 

what does that mean?

Wed, 05/28/2014 - 18:46 | 4803378 Al Huxley
Al Huxley's picture

Maybe I'm missing your sarcasm, so apologies if that's the case - but what's funny about it is 'I've been investing since January'...

Wed, 05/28/2014 - 19:15 | 4803471 max2205
max2205's picture

I only buy on tuesdays and every day at 3:30.

 

WTF is everyone's problem!?

Thu, 05/29/2014 - 09:54 | 4805356 trippy64
trippy64's picture

The comment stemmed from reporter talking to a lady and she was stunned by the fact she was investing like crazy for two months, and made money, then lost everything. And her historical perspective was 2 months.

Wed, 05/28/2014 - 18:15 | 4803272 aempirei
aempirei's picture

Please read up on variance, covariance, standard deviation, correlation and systematic vs. unsystematic risk before providing your misguided opinion on the merits of diversification. 

Wed, 05/28/2014 - 16:15 | 4802905 Gringo Viejo
Gringo Viejo's picture

"A MOST MARVELOUS AND PROFITABLE UNDERTAKING....NO ONE TO KNOW WHAT IT IS"

....sign on a stock kiosk in London during the South Sea's Bubble.

Wed, 05/28/2014 - 19:05 | 4803448 Remington IV
Remington IV's picture

AmeriKa

Wed, 05/28/2014 - 16:04 | 4802879 Agent P
Agent P's picture

22. Gold, bitchez!!!!

(it's been awhile)

Wed, 05/28/2014 - 17:05 | 4803047 quasimodo
quasimodo's picture

Tell that to gold and silver already

 

Wed, 05/28/2014 - 16:06 | 4802882 eatthebanksters
eatthebanksters's picture

In the same way as our government has abandoned enforcing the law...

Wed, 05/28/2014 - 16:20 | 4802918 goldhedge
goldhedge's picture

It still likes to enforce "the law" abroad though.

Wed, 05/28/2014 - 16:06 | 4802883 kito
kito's picture

you hear that fonz!!! turn off cnbc, even simon black knows what to do!! and you need to listen to simon, he is selling one room casitas in the andean paramo at gringo prices. free chilean inflation protection bonds included in the deal! mermaids in the swimming pool!!!!!

Wed, 05/28/2014 - 16:08 | 4802885 DOGGONE
DOGGONE's picture

Hi Lady,
Start here:

The Public Be Suckered
http://patrick.net/forum/?p=1230886

Wed, 05/28/2014 - 16:27 | 4802937 robilla
robilla's picture

22. Don't listen to Simon Black

Wed, 05/28/2014 - 16:34 | 4802950 antidisestablis...
antidisestablishmentarianismishness's picture

Is this the same unnamed Hong Kong housewife who is currently hoarding gold?

Wed, 05/28/2014 - 16:35 | 4802951 pauhana
pauhana's picture

Should tell you something when all the talking heads are screaming "I can't trade a market with no volatility."  Really?  Maybe there is no volatility because there is no (true) market.

Wed, 05/28/2014 - 16:37 | 4802954 Chuck Knoblauch
Chuck Knoblauch's picture

Speculators pushing up food prices. People are going to die. Not the ones you expect.

Wed, 05/28/2014 - 17:00 | 4803025 saints51
saints51's picture

Speculators=scapegoat=myth

Wed, 05/28/2014 - 17:39 | 4803133 Chuck Knoblauch
Chuck Knoblauch's picture

Exports=inflation=hedges=idiot (you).

Wed, 05/28/2014 - 17:58 | 4803222 xtop23
xtop23's picture

Arab spring anyone?

If youre spending 60% of your budget on food and America's exported inflation spikes those costs up to 80% .... all of a sudden you are extremely pissed off.

Certainly specs have a hand in chasing yield that increases the costs of food, but compared to Auntie Yellen's printing press..... that's just a fart in the wind.

Wed, 05/28/2014 - 16:47 | 4802981 chdwlch1
chdwlch1's picture

One of my favorite quotes from a Wall Streeter that should result in every retail investor fleeing due to the epic push to sell equities on CNBS etc.

"I know that if someone says, 'I have a great opportunity for you', then he is trying to send fuckness in my direction."

So there's a great investing lesson from one of the guys in the trenches...be on the lookout for "fuckness" ZHers!!!

Wed, 05/28/2014 - 17:07 | 4803052 Fuh Querada
Fuh Querada's picture

meaning the "investors' '" fuckability....

Wed, 05/28/2014 - 16:58 | 4803023 AgShaman
AgShaman's picture

"I'd keep playing. I don't think the heavy stuff's gonna come down for quite awhile."

- Random Money Manager/Greenskeeper

Wed, 05/28/2014 - 17:24 | 4803091 I Write Code
I Write Code's picture

The CNBC web site is pretty good, actually.

Wed, 05/28/2014 - 17:56 | 4803217 MrFailSauce
MrFailSauce's picture

"Risk is poorly defined as volatility"

Duh!  A sine wave can have arbitarily high volatility under standard definitions but it presents a guaranteed opportunity for profit.

Wed, 05/28/2014 - 20:01 | 4803619 Kreditanstalt
Kreditanstalt's picture

You'e gotta be pretty GODLIKE to follow all of that...!

Wed, 05/28/2014 - 20:02 | 4803622 Mad Muppet
Mad Muppet's picture

That's odd...I kept expecting Fonestar to pipe in with his BTC rap. Maybe I checked the thread too early in the day.

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