Skip to main content

Seth Klarman: Lessons from 2008

Widely followed value investor and (Baupost Group) hedge fund manager, Seth Klarman shares his lessons from the recent financial crisis (Hat tip to Derek Hernquist for recently highlighting this piece).

Here's an excerpt from Klarman's, "Forgotten Lessons of 2008":
"One might have expected that the near-death experience of most investors in 2008 would generate valuable lessons for the future. We all know about the “depression mentality” of our parents and grandparents who lived through the Great Depression.

Memories of tough times colored their behavior for more than a generation, leading to limited risk taking and a sustainable base for healthy growth. Yet one year after the 2008 collapse, investors have returned to shockingly speculative behavior...Below, we highlight the lessons that we believe could and should have been learned from the turmoil of 2008. Some of them are unique to the 2008 melt- down; others, which could have been drawn from general market observation over the past several decades, were certainly reinforced last year.

Shockingly, virtually all of these lessons were either never learned or else were immediately forgotten by most market participants..."

As you'll read, Klarman not only goes over the (largely forgotten or overlooked) "20 investment lessons" of 2008, he also reviews many of the "false lessons" that have been learned by investors and speculators during the 2009 recovery period.

There are some very worthwhile points to absorb from Seth's piece, so you might want to bookmark his essay for future reference. You can also find a scan of Klarman's essay here.

Related articles and posts:

1. Seth Klarman: Margin of Safety - Finance Trends

2. Thomas Woods interview: Meltdown - Finance Trends. 

3. Lessons from Charlie Munger - Finance Trends.

Subscribe to Finance Trends by email or get new posts via RSS. You can follow our real-time updates on Twitter.     
Labels:

Popular posts from this blog

Nasdaq credit rating junked.

S&P cut Nasdaq's credit rating to junk status citing debt burdens and its questionable strategy to buy a controlling interest in the London Stock Exchange. Financial Times reported that the exchange's counterparty credit & bank loan rating were lowered fromm BBB- (lowest investment grade rating) to BB+. The change will increase Nasdaq's borrowing costs should it wish to pursue aquisition targets. For an earlier look at the exchange consolidation trend that brought about Nasdaq's push for a stake in the LSE, please see "Exchange fever" .
Read more

Clean Money - John Rubino: Book review

Clean Money by John Rubino 274 pages. Hoboken, New Jersey John Wiley & Sons. 2009. 1st Edition. The bouyant stock market environment of the past several years is gone, and the financial wreckage of 2008 is still sharp in our minds as a new year starts to unfold. Given the recent across-the-board-declines in global stock markets (and most asset classes) that have left many investors shell-shocked, you might wonder if there is any good reason to consider the merits of a hot new investment theme, such as clean energy. However, we shouldn't be too hasty to write off all future stock investments. After all, the market declines of 2008 may continue into 2009, but they may also leave interesting investment opportunities in their wake. Which brings us to the subject of this review. John Rubino, author and editor of GreenStockInvesting.com , recently released a new book on renewable energy and clean-tech investing entitled, Clean Money: Picking Winners in the Green Tech Boom . In Clean ...
Read more

Jesse Livermore: How to Trade in Stocks (1940 Ed. E-book)

If you've been around markets for any length of time, you've probably heard of 20th century supertrader, Jesse Livermore . Today we're highlighting his rare 1940 work, How to Trade in Stocks (ebook, pdf). But first, a brief overview of Livermore's life and trading career (bio from Jesse Livermore's Wikipedia entry). "During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly. Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and...
Read more