Seth Klarman – Don’t be a Yield Pig

In 1992, Seth Klarman worte an article to Forbes called “Don’t be a yield pig”. As current market participants complacency has risen to amazing levels, it seems this 21-year old article is from last week. Definitely it’s worth to dedicate 5 minutes to read it.

Richard Feynman – No Ordinary Genius

As the title says, Feynman was no ordinary genius. His endless curiosity, questions and imagination enabled him to never stop. He also confessed he has never frozen because he didn’t know something, on the contrary, that motivated him.
With all his humbleness and tremendous willpower, he was able to think independently, using the art of storytelling, simple examples and qualitative/conceptual thinking in order to explain complex problems. Also,  geometric visualization skills helped him a lot.
Pieces of advice are “use your brain”and “read everything you can”. Quoting Li Lu’s interview in the last Graham & Doddsville newsletter, “know what know, know what you don’t know, know what you don’t have to know and there are always unknow unkowns.”
Don’t miss the opportunity to check out this documentary on Feynman’s life.

Graham & Doddsville Spring 2013

In this latest issue, I highlight Li Lu’s interview, whom is also personal friend of Charlie Munger – I’d rather spare the details so you’re forced to read the full content. Besides, Preston Athey from T. Rowe’s Value Fund mentions his edge over his peers is that he managed a growth strategy before, so he was more prone to letting winners keep winning. Instead of setting a price target, he would rather compare relative valuations in order to mitigate selling too soon. A highlight is his low portfolio turnover (less than 10% in the last 10 years) mostly caused by forced selling, like takeovers.

Detective Skills

As already said in a prior post, Kahneman’s framework of our brains, working in an intuitive system one and a reflexive system two, is key to understand how our minds trick us. In order to be/act reflexively, we must enforce ourselves to de-bias. This painful effort is clearly cited by Beveridge in his book, “The art of Scientific Investigation”. Montier argued the same in his 2002 paper.

Being skeptic may be one of the paths to wordily wisdom. FOCUS, ATTENTION, MOTIVATION, AWARENESS are key words.

“Powers of observation can be developed by cultivating the habit of watching things with an active, enquiring mind. It is no exaggeration to say that well developed habits of observation are more important in research than large accumulations of academic learning.” — W. I. B. Beveridge in The Art of Scientific Investigation