Ruane, Research Analyst.’” – Bill Ruane
“I don’t believe all this nonsense about market timing. Just buy good value and when the market is ready that value will be recognized.” – Henry Singleton
Charlie Munger on Discount Rates and Opportunity Cost
Discounting future cash flows is one of the most frequently used methods of business valuation. It's also the preferred method of Warren Buffett and Charlie Munger. If you’re looking for value stocks, and exclusive access to value-focused hedge fund managers, check out Hidden Value Stocks. While he's never laid out his exact valuation process, Buffett Read More
John Kenneth Galbraith:
- We all agree that pessimism is a mark of superior intellect.
- Meetings are indispensable when you don’t want to do anything.
- The only function of economic forecasting is to make astrology look respectable.
- Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.
- In any great organization it is far, far safer to be wrong with the majority than to be right alone.
- We have two classes of forecasters: Those who don’t know, and those who don’t know they don’t know.
“To model correctly one tranche of one CDO took about three hours on one of the fastest computers in theUnited States. There is no chance that pretty much anybody understood what they were doing with these securities. Creating things that you don’t understand is really not a good idea no matter who owns it.” – John Thain
- “If there is one common theme to the vast range of crises…it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom.” – Rogoff and Reinhart, This Time is Different: Eight Centuries of Financial Folly
- “Perhaps more than anything else, failure to recognize the precariousness and fickleness of confidence — especially in cases in which large short-term debts need to be rolled over continuously — is the key factor that gives rise to the this-time-is-different syndrome. Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang! — confidence collapses, lenders disappear, and a crisis hits.” – Rogoff and Reinhart, This Time is Different: Eight Centuries of Financial Folly
- “The essence of the this-time-is-different syndrome is…rooted in the firmly held belief that financial crises are things that happen to other people in other countries at other times; crises do not happen to us, here and now. We are doing things better, we are smarter, we have learned from past mistakes. The old rules of valuation no longer apply. Unfortunately, a highly leveraged economy can unwittingly be sitting with its back at the edge of a financial cliff for many years before chance and circumstance provoke a crisis of confidence that pushes it off.” – Rogoff and Reinhart, This Time is Different: Eight Centuries of Financial Folly
- “Broadly speaking, financial crises are protracted affairs. More often than not, the aftermath of severe financial crises share three characteristics:
- “First, asset market collapses are deep and prolonged. Declines in real housing prices average 35 percent stretched out over six years, whereas equity price collapses average 56 percent over a downturn of about three and a half years.
- “Second, the aftermath of banking crises is associated with profound declines in output and unemployment. The unemployment rate rises and average of 7 percentage points during the down phase of the cycle, which lasts on average more than four years. Output falls (from peak to trough) more than 9 percent on average, although the duration of the downturn, averaging roughly two years, is considerably shorter than that of unemployment.
- Third, the value of government of debt tends to explode.” – Rogoff and Reinhart, This Time is Different: Eight Centuries of Financial Folly
“The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version.” – JK Galbraith
“Successful investors must temper the arrogance of taking a stand with a large dose of humility, accepting that despite their efforts and care, they may in fact be wrong.” – Seth Klarman
”Short-term performance envy causes many of the shortcomings that lock most investors into a perpetual cycle of underachievement. Watch your competitors not out of jealousy but out of respect and focus your efforts not on replicating others’ portfolios but on looking for opportunities where they are not. The only way for investors to significantly outperform is to periodically stand far apart from the crowd, something few are willing, or able, to do.” – Seth Klarman
“What you really want to do in investments is figure out what’s important and knowable. If it’s unimportant or unknowable you forget about it.” – Warren Buffett
“If you study the root causes of business disasters, over and over you’ll find this predisposition toward endeavors that offer immediate gratification.” – Clayton Christensen
“Can anyone remember when the times were not hard, and the money not scarce?” – Ralph Waldo Emerson
“Performance isn’t what beats a path to your door,” says Robert Nichols, founder of Windward Capital Management Co., a Los Angeles-based firm with $250 million in assets. “It’s sales and marketing.”
“Being a value investor means you look at the downside before looking at the upside.” – Li Lu
In the oil & gas business, the cure for high prices is high prices, and the cure for low prices is low prices. – unknown
“We worry top-down, but we invest bottom-up.” – Seth Klarman
“I know a lot of people have very strong and definite plans that they’ve worked out on all kinds of things, but we’re subject to a tremendous number of outside influences and the vast majority of them cannot be predicted. So my idea is to stay flexible. My only plan is to keep coming to work every day. I like to steer the boat each day rather than plan ahead way into the future.” – Henry Singleton
“I don’t believe all this nonsense about market timing. Just buy very good value and when the market is ready that value will be recognized.” – Henry Singleton
“Singleton has an almost uncanny ability to resist being caught up in the fads and fancies of the moment. Like most great innovators [and investors! – Ed.], Henry Singleton is supremely indifferent to criticism.” – Robert Flaherty writing in Forbes, 9 July 1979
“In October 1972 we tendered for 1 million shares and 8.9 million came in. We took them all at $20 and figured that was a fluke and that we couldn’t do it again. But instead of going up, our stock went down. So we kept tendering, first at $14 and then doing two bonds-for-stock swaps. Every time one tender was over the stock would go down and we’d tender again and we’d get a new deluge. Then two more tenders at $18 and $40.” – Henry Singleton; a few years later, the stock sold for $130
“Our attitude toward cash generation and asset management came out of our own thought process. After we acquired a number of businesses we reflected on aspects of business. Our own conclusion was that the key was cash flow.” – Henry Singleton 
“It’s good to buy a large company with fine businesses when the price is beaten down over worry about one problem.” – Henry Singleton
“I do not define my job in any rigid terms but in terms of having the flexibility to what seems to me to be in the best interests of the company at any times.” – Henry Singleton
“I believe in maximum flexibility, so I reserve the right to change my position on any subject when the external environment relating to any topic changes too.” – Henry Singleton
“I know a lot of people have very strong and definite plans they they’ve worked out on all kinds of things, but we’re subject to a tremendous number of outside influences and the vast majority of them cannot be predicted. So my idea is to stay flexible.” – Henry Singleton
“We invest in undervalued companies that exhibit strong fundamentals, above-market dividend yields and historic earnings growth, which our analysis indicates will persist. Our strategy is to own strong, fundamentally sound companies and to avoid speculative stocks or potential bankruptcies.” –