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I’m bullish on any investor who: * stays away from the pressure to be "with it" every quarter * stays away from stuff that everyone is talking about * stays

I’m bullish on any investor who: * stays away from the pressure to be "with it" every quarter * stays away from stuff that everyone is talking about * stays away from short term thinking (like real time datasets) * stays away from statistical artefacts and spurious relations (aka “huge amounts of data”) * stays away from stuff where they don't understand the basic business models * stays away from stuff that is built on promises * stays away from mostly all hedging, other than paying the proverbial 50c for a dollar * stays away from diversification "just because" (looks at each individual investment on its own merits) * stays away from arbitrary limitations on asset types or sectors * stays away from short selling (or situations where you can loose more than what you put in) * stays away from giving or taking tips on individual investments * even stays away from feeling they have to kick ass every quarter (if you just can't find anything good... do nothing) * instead just focuses on not loosing big quantities of his/her own money * tries to keep costs down (less data, less trading, no hedging, low fees, less dealing with currency exchange) * doesn't worry about volatility or even enjoys it * has a few large winners and then some smaller potential winners That may exclude most if not all funds, hedged or otherwise. Also: in my experience every 19 year old and his dog now tend to consider themselves "macro traders". It’s an indication of how extremely financialized the entire world has become since the 80s. That in itself bodes ill for the 2 and 20 crowd.

ianleeclark 10y ago
So you're bearish on any investor.
- deleted 10y ago
  [deleted]
- blowski 10y ago
  I suspect those filters produce the same quality as grabbing names from a hat, since they are a list of popular but vague aphorisms. Judging each and every investment on its own merits is the only way to succeed.
  - jomamaxx 10y ago
    "Judging each and every investment on its own merits is the only way to succeed." I completely disagree. You have to judge the (long term) investment in full context of the market, i.e. what other people are thinking about it, regulatory climate, geopolitical issues, taxation, position in the value chain, status of customers/suppliers etc.. And for some strategies - none of it is relevant. If you can make trades 0.1 seconds faster than anyone else, the nature of the approach will be such that you don't care anything about the company other than where it's price is now - and where it will probably be 0.1 seconds from now.
  - unknown_apostle 10y ago
    > Judging each and every investment on its own merits is the only way to succeed. True. And yet the world of investing (I'm not talking about market makers etc) is filled with funds whose composition is determined by everything except simply buying predictable cash flows for cheap, wherever you can find them.
- mwerty 10y ago
  Seth Klarman seems to pass GP's filter (as do some other Value Investors).
- unknown_apostle 10y ago
  No. Just the vast majority.
jomamaxx 10y ago
Every one of those items could be a good thing, and the primary 'alpha producing quality' of a given find. * stays away from stuff everyone else is talking about --> the big hits only come from things that everyone eventually 'talks about'. So you must be aware of this dynamic. You don't want to ignore the herd - you want to be just ahead of it. Ergo - you have to understand herd dynamics. * stays away from hedging - 'hedging' is still used often, and it's an important part of risk mitigation and execution strategy. Anyone that ignores herding is ignoring an essential tool that they can use * stays away from diversification - same as previous: financial diversification is another essential tool. * arbitrary limitations - no investor makes 'arbitrary' decisions. They stay away from certain sectors for a reason: they don't understand it, it's risky, there are geopolitical issues they can't control etc. * tries to keep costs down - uh ... keeping costs down is what every company should aspire to do. In fact - if a fund can get rid of 1/2 it's staff through automation, well, you could make more money depending on how the fees are structured * doesn't worry about volatility - no - you definitely want them to worry about volatility as it's an essential financial characteristic of the market and means a lot. If your strategy is to invest in cheap blue-chips that pay nice dividends because other investors are not paying attention ... well, volatility is bad. Here's the key: Investing is not really investing. It's mostly gambling - in the sense that it's a zero-sum game, played against other players. It's more like poker. You don't win at poker just by playing smart cards. You win at poker by understanding other players predictable behaviour, ie understanding the market, as it is driven by other players. Though markets do grow and there are some 'bonus surpluses' for everyone, most firms do not win off this - they can only win if someone else loses.
- Retric 10y ago
  Herds increase risks and are thus bad. If your going to try and predict human behavior your better off using that when buying stock. AKA if you know the iPhone is going to win then buy Apple. Or if you bought Dell at IPO that's 500x returns over 12 years.
- unknown_apostle 10y ago
  * “Stuff everyone is talking about”: I mean mostly staying away from IPOs, crap on business magazine covers, TINA narratives etc. Especially stay away from “tips”. And from stuff involving former politicians or government (yea I’m European). Actually I can go on for hours on all the stuff I don't like. * Dealing with risk: hedging and diversification are expensive in more than 1 way. An investor can manage risk with cruder and cheaper means. E.g. by taking out the original investment after the first ~100% in capital gains. Or quickly cutting companies that start violating your initial criteria. Or limiting yourself to trampled paper that hides a beautiful earning machine. Or most important of all: doing nothing in case you can’t find that kind of trampled paper. * Wrt risk: I guess periodically holding a huge war chest of cash is the only “diversification” I can approve of. * Many funds and portfolios are built around arbitrary criteria. By which I mean any criteria that have nothing to do with predictability of earnings and low prices for each individual position (when talking about stocks). * Volatility is irrelevant. Actually, if you have the tiniest bit of patience and a decent stomach, volatility is awesome. I’m happy if I can pay $1 dollar for a well run company that makes 0.25 dollars in yearly profits. I’m happier if it’s an illiquid company and one beautiful day my fishing order for $0.75 dollars gets filled. Often, companies are more volatile when they’re down, so I even feel confident to say that volatility can do wonders for your performance. I don’t think proper investing is anything like gambling and I’m pretty sure you’re not playing a zero sum game. Trading on the other hand is a zero sum game. That’s one reason to not be bullish on any given guy who trades without working for Rentec & co.

ianleeclark 10y ago

So you're bearish on any investor.

deleted 10y ago
[deleted]
blowski 10y ago
I suspect those filters produce the same quality as grabbing names from a hat, since they are a list of popular but vague aphorisms. Judging each and every investment on its own merits is the only way to succeed.
- jomamaxx 10y ago
  "Judging each and every investment on its own merits is the only way to succeed." I completely disagree. You have to judge the (long term) investment in full context of the market, i.e. what other people are thinking about it, regulatory climate, geopolitical issues, taxation, position in the value chain, status of customers/suppliers etc.. And for some strategies - none of it is relevant. If you can make trades 0.1 seconds faster than anyone else, the nature of the approach will be such that you don't care anything about the company other than where it's price is now - and where it will probably be 0.1 seconds from now.
- unknown_apostle 10y ago
  > Judging each and every investment on its own merits is the only way to succeed. True. And yet the world of investing (I'm not talking about market makers etc) is filled with funds whose composition is determined by everything except simply buying predictable cash flows for cheap, wherever you can find them.
mwerty 10y ago
Seth Klarman seems to pass GP's filter (as do some other Value Investors).
unknown_apostle 10y ago
No. Just the vast majority.

jomamaxx 10y ago

Every one of those items could be a good thing, and the primary 'alpha producing quality' of a given find. * stays away from stuff everyone else is talking about --> the big hits only come from things that everyone eventually 'talks about'. So you must be aware of this dynamic. You don't want to ignore the herd - you want to be just ahead of it. Ergo - you have to understand herd dynamics. * stays away from hedging - 'hedging' is still used often, and it's an important part of risk mitigation and execution strategy. Anyone that ignores herding is ignoring an essential tool that they can use * stays away from diversification - same as previous: financial diversification is another essential tool. * arbitrary limitations - no investor makes 'arbitrary' decisions. They stay away from certain sectors for a reason: they don't understand it, it's risky, there are geopolitical issues they can't control etc. * tries to keep costs down - uh ... keeping costs down is what every company should aspire to do. In fact - if a fund can get rid of 1/2 it's staff through automation, well, you could make more money depending on how the fees are structured * doesn't worry about volatility - no - you definitely want them to worry about volatility as it's an essential financial characteristic of the market and means a lot. If your strategy is to invest in cheap blue-chips that pay nice dividends because other investors are not paying attention ... well, volatility is bad. Here's the key: Investing is not really investing. It's mostly gambling - in the sense that it's a zero-sum game, played against other players. It's more like poker. You don't win at poker just by playing smart cards. You win at poker by understanding other players predictable behaviour, ie understanding the market, as it is driven by other players. Though markets do grow and there are some 'bonus surpluses' for everyone, most firms do not win off this - they can only win if someone else loses.

Retric 10y ago
Herds increase risks and are thus bad. If your going to try and predict human behavior your better off using that when buying stock. AKA if you know the iPhone is going to win then buy Apple. Or if you bought Dell at IPO that's 500x returns over 12 years.
unknown_apostle 10y ago
* “Stuff everyone is talking about”: I mean mostly staying away from IPOs, crap on business magazine covers, TINA narratives etc. Especially stay away from “tips”. And from stuff involving former politicians or government (yea I’m European). Actually I can go on for hours on all the stuff I don't like. * Dealing with risk: hedging and diversification are expensive in more than 1 way. An investor can manage risk with cruder and cheaper means. E.g. by taking out the original investment after the first ~100% in capital gains. Or quickly cutting companies that start violating your initial criteria. Or limiting yourself to trampled paper that hides a beautiful earning machine. Or most important of all: doing nothing in case you can’t find that kind of trampled paper. * Wrt risk: I guess periodically holding a huge war chest of cash is the only “diversification” I can approve of. * Many funds and portfolios are built around arbitrary criteria. By which I mean any criteria that have nothing to do with predictability of earnings and low prices for each individual position (when talking about stocks). * Volatility is irrelevant. Actually, if you have the tiniest bit of patience and a decent stomach, volatility is awesome. I’m happy if I can pay $1 dollar for a well run company that makes 0.25 dollars in yearly profits. I’m happier if it’s an illiquid company and one beautiful day my fishing order for $0.75 dollars gets filled. Often, companies are more volatile when they’re down, so I even feel confident to say that volatility can do wonders for your performance. I don’t think proper investing is anything like gambling and I’m pretty sure you’re not playing a zero sum game. Trading on the other hand is a zero sum game. That’s one reason to not be bullish on any given guy who trades without working for Rentec & co.