Seth Klarman Quotes & Sayings

When a Wall Street analyst or broker expresses optimism, investors must take it with a grain of salt. — Seth Klarman

Warren Buffett once wrote that value investing is like an inoculation
it either takes or it doesn't
and when you explain to somebody what it is and how it works and why it works and show them the returns, either they get it or they don't. — Seth Klarman

It is crucial in a sound investment process to search a mile wide than a mile deep with they find something - also.. never stop digging for information. — Seth Klarman

Always remembering that we might be wrong, we must contemplate alternatives, concoct hedges, and search vigilantly for validation of our assessments. We always sell when a security's price begins to reflect full value, because we are never sure that our thesis will be precisely correct. — Seth Klarman

The overwhelming majority of people are comfortable with consensus, but successful investors tend to have a contrarian bent, — Seth Klarman

Flexible approach - will look at ALL asset classes. — Seth Klarman

Bad things happen, but really bad things do not. Do buy the dips, especially the lowest quality securities when they come under pressure, because declines will quickly be reversed. — Seth Klarman

To a value investor, investments come in three varieties: undervalued at one price, fairly valued at another price, and overvalued at still some higher price. The goal is to buy the first, avoid the second, and sell the third. — Seth Klarman

Markets need not be in sync with one another. Simultaneously, the bond market can be priced for sustained tough times, the equity market for a strong recovery, and gold for high inflation. Such an apparent disconnect is indefinitely sustainable. — Seth Klarman

Once you adopt a value-investment strategy, any other investment behavior starts to seem like gambling. — Seth Klarman

Financial innovation can be highly dangerous, though almost no one will tell you this. New financial products are typically created for sunny days and are almost never stress-tested for stormy weather. Securitization is an area that almost perfectly fits this description; markets for securitized assets such as subprime mortgages completely collapsed in 2008 and have not fully recovered. Ironically, the government is eager to restore the securitization markets back to their pre-collapse stature. — Seth Klarman

It is important to remember that value investing is not a perfect science. It is an, with an ongoing need for judgment, refinement, patience, and reflection. It requires endless curiosity, the relentless pursuit of additional information, the raising of questions, and the search for answers. It necessitates dealing with imperfect information - knowing you will never know everything and that that must not prevent you from acting. It requires a precarious balance between conviction, steadfastness in the face of adversity, and doubt - keeping in mind the possibility that you could be wrong. — Seth Klarman

The best protection against risk is knowing what you are doing. — Seth Klarman

While it might seem that anyone can be a value investor, the essential characteristics of this type of investor-patience, discipline, and risk aversion-may well be genetically determined. — Seth Klarman

If you can remember that stocks aren't pieces of paper that gyrate all the time
they are fractional interests in businesses
it all makes sense. — Seth Klarman

Analysts recommendations may not produce good results. In part this is due to the pressure placed on these analysts to recommend frequently rather than wisely. — Seth Klarman

A simple rule applies: if you don't quickly comprehend what a company is doing, then management probably doesn't either. — Seth Klarman

In a crisis, stocks of financial companies are great investments, because the tide is bound to turn. Massive losses on bad loans and soured investments are irrelevant to value; improving trends and future prospects are what matter, regardless of whether profits will have to be used to cover loan losses and equity shortfalls for years to come. — Seth Klarman

Value investing is risk aversion. — Seth Klarman

It is crucial to have a strategy in place before problems hit, precisely because no one can accurately predict the future direction of the stock market or economy. Value investing, the strategy of buying stocks at an appreciable discount from the value of the underlying businesses, is one strategy that provides a road map to successfully navigate not only through good times but also through turmoil. — Seth Klarman

Excess capacity in people, machines, or property will be quickly absorbed. — Seth Klarman

Value investing is at its core the marriage of a contrarian streak and a calculator. — Seth Klarman

I think Buffett is a better investor than me because he has a better eye toward what makes a great business. And when I find a great business I'm happy to buy it and hold it. Most businesses don't look so great to me. — Seth Klarman

A commodity doesn't have the same characteristics as a security, characteristics that allow for analysis. Other than a recent sale or appreciation due to inflation, analyzing the current or future worth of a commodity is nearly impossible. — Seth Klarman

Individual and institutional investors alike frequently demonstrate an inability to make long-term investment decisions based on business fundamentals. — Seth Klarman

The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions. — Seth Klarman

The real secret to investing is that there is no secret to investing. — Seth Klarman

Investing today may well be harder than it has been at any time in our three decades of existence, — Seth Klarman

The government - the ultimate short-term-oriented player - cannot withstand much pain in the economy or the financial markets. Bailouts and rescues are likely to occur, though not with sufficient predictability for investors to comfortably take advantage. The government will take enormous risks in such interventions, especially if the expenses can be conveniently deferred to the future. Some of the price-tag is in the form of back- stops and guarantees, whose cost is almost impossible to determine. — Seth Klarman

It's awful to have a depression, but it's a great thing to have a depression mentality because it means that we are not speculating, we are not living beyond our means, we don't quit our job to take a big risk because we know we might not get another job. There is something stable about a country, a society built on those values. — Seth Klarman

Most institutional investors feel compelled to swing at almost every pitch and forgo batting selectivity for frequency. — Seth Klarman

One of the biggest challenges in investing is that the opportunity set available today is not the complete opportunity set that should be considered. Limiting your opportunity set to the one immediately at hand would be like limiting your spouse to the students you met in high school — Seth Klarman

While no one wishes to incur losses, you couldn't prove it from an examination of the behavior of most investors and speculators. The speculative urge that lies within most of us is strong; the prospect of a free lunch can be compelling, especially when others have already seemingly partaken. It can be hard to concentrate on potential losses while others are greedily reaching for gains and your broker is on the phone offering shares in the latest "hot" initial public offering. Yet the avoidance of loss is the surest way to ensure a profitable outcome. — Seth Klarman

The way to maximize outcome is to focus on the process. — Seth Klarman

Value in relation to price, not price alone, must determine your investment decisions. If you look to Mr Market as a creator of investment opportunities (where price departs from underlying value), you have the makings of a value investor. If you insist on looking to Mr Market for investment guidance however, you are probably best advised to hire someone else to manage your money. — Seth Klarman

At the worst possible moment, when your fund is down because cheap things have gotten cheaper, you need to have capital, to have clients who will actually love the phone call and-most of the time, if not all the time-add, rather than subtract, capital. — Seth Klarman

In a world in which most investors appear interested in figuring out how to make money every second and chase the idea du jour, there's also something validating about the message that it's okay to do nothing and wait for opportunities to present themselves or to pay off. That's lonely and contrary a lot of the time, but reminding yourself that that's what it takes is quite helpful. — Seth Klarman

At equal returns, public investments are generally superior to private investments not only because they are more liquid but also because amidst distress, public markets are more likely than private ones to offer attractive opportunities to average down. — Seth Klarman

Here's how to know if you have the makeup to be an investor. How would you handle the following situation? Let's say you own a Procter & Gamble in your portfolio and the stock price goes down by half. Do you like it better? If it falls in half, do you reinvest dividends? Do you take cash out of savings to buy more? If you have the confidence to do that, then you're an investor. If you don't, you're not an investor, you're a speculator, and you shouldn't be in the stock market in the first place. — Seth Klarman

The average person can't really trust anybody. They can't trust a broker, because the broker is interested in churning commissions. They can't trust a mutual fund, because the mutual fund is interested in gathering a lot of assets and keeping them. And now it's even worse because even the most sophisticated people have no idea what's going on. — Seth Klarman

We are big fans of fear, and in investing it is clearly better to be scared than sorry. — Seth Klarman

Be sure that you are well compensated for illiquidity - especially illiquidity without control - because it can create particularly high opportunity costs. — Seth Klarman

Short sellers age in dog years. — Seth Klarman

The risk of an investment is described by both the probability and the potential amount of loss. The risk of an investment-the probability of an adverse outcome-is partly inherent in its very nature. A dollar spent on biotechnology research is a riskier investment than a dollar used to purchase utility equipment. The former has both a greater probability of loss and a greater percentage of the investment at stake. — Seth Klarman

Typically, we make money when we buy things. We count the profits later, but we know we have captured them when we buy the bargain. — Seth Klarman

Successful investors like stocks better when they're going down. When you go to a department store or a supermarket, you like to buy merchandise on sale, but it doesn't work that way in the stock market. In the stock market, people panic when stocks are going down, so they like them less when they should like them more. When prices go down, you shouldn't panic, but it's hard to control your emotions when you're overextended, when you see your net worth drop in half and you worry that you won't have enough money to pay for your kids' college. — Seth Klarman

The government can indefinitely control both short-term and long-term interest rates. — Seth Klarman

I don't have a Bloomberg on my desk. I don't care. — Seth Klarman

Ratings agencies are highly conflicted, unimaginative dupes. They are blissfully unaware of adverse selection and moral hazard. Investors should never trust them. — Seth Klarman

As Buffett has often observed, value investing is not a concept that can be learned and gradually applied over time. It is either absorbed and adopted at once, or it is never truly learned. — Seth Klarman

Wall Street can be a dangerous place for investors. You have no choice but to do business there, but you must always be on your guard. The standard behavior of Wall Streeters is to pursue maximization of self-interest; the orientation is usually short term. This must be acknowledged, accepted, and dealt with. If you transact business with Wall Street with these caveats in mind, you can prosper. If you depend on Wall Street to help you, investment success may remain elusive. — Seth Klarman

When a government official says a problem has been "contained," pay no attention. — Seth Klarman

In reality, no one knows what the market will do; trying to predict it is a waste of time, and investing based upon that prediction is a speculative undertaking. — Seth Klarman

The trick of successful investors is to sell when they want to, not when they have to. — Seth Klarman

Over the long run, the crowd is always wrong. — Seth Klarman

Value investing by its very nature is contrarian. — Seth Klarman

You probably would not choose to dine at a restaurant whose chef always ate elsewhere. I do eat my own cooking, and I don't "dine out" when it comes to investing. — Seth Klarman

Investors frequently benefit from making decisions with less than perfect knowledge and are well rewarded for bearing the risk of uncertainty. The time other investors spend delving into the last unanswered detail may cost them the chance to buy into situations at prices so low they offer a margin of safety despite the incomplete information — Seth Klarman

Investment success cannot be captured in a mathematical equation or a computer program. — Seth Klarman

All an investor can do is follow a consistently disciplined and rigorous approach; over time the returns will come — Seth Klarman

Value investing is the discipline of buying shares at a significant discount from their current underlying values and holding them until more of their value is realised. The element of a bargain is the key to the process. — Seth Klarman

There is an old saying, "How did you go bankrupt?" And the answer is, "Gradually, and then suddenly." The impending fiscal crisis in the United States will make its appearance in the same way. — Seth Klarman

People should be highly sceptical of anyone's including their own, ability to predict the future, and instead pursue strategies that can survive whatever may occur. — Seth Klarman

Loss avoidance must be the cornerstone of your investment philosophy. — Seth Klarman

I think markets will never be efficient because of human nature. — Seth Klarman

A value strategy is of little use to the impatient investor since it usually takes time to pay off. — Seth Klarman

Literally draw a detailed map-like an organization chart-of interlocking ownership and affiliates, many of which were also publicly traded. So, identifying one stock led him to a dozen other potential investments. To tirelessly pull threads is the lesson that I learned from Mike Price. — Seth Klarman

Selling, in particular, can be a challenge; many investors are tempted to become more optimistic when a security is performing well. This temptation must be resisted; tax considerations aside, when a security reaches full valuation, there is no longer a reason to own it. — Seth Klarman

Almost no one will accept responsibility for his or her role in precipitating a crisis: not leveraged speculators, not willfully blind leaders of financial institutions, and certainly not regulators, government officials, ratings agencies or politicians. — Seth Klarman

It's incredibly important to note that when you don't allow failure, you get more failure. — Seth Klarman

Be indifferent if you lose your short term clients, remember they are your own worst enemy — Seth Klarman

There are only a few things investors can do to counteract risk: diversify adequately, hedge when appropriate, and invest with a margin of safety. It is a precisely because we do not and cannot know all the risks of an investment that we strive to invest at a discount. The bargain element helps to provide a cushion for when things go 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

Value investing is predicated on the efficient market hypothesis being wrong. — Seth Klarman

Macro worries are like sports talk radio. Everyone has a good opinion which probably means that none of them are good. — Seth Klarman

When people give away stocks based on forced selling or fear that is usually a great opportunity. — Seth Klarman

The cost of performing well in bad times can be relative underperformance in good times. — Seth Klarman

I find value investing to be a stimulating, intellectually challenging, ever changing, and financially rewarding discipline — Seth Klarman

Targeting investment returns leads investors to focus on potential upside rather on downside risk ... rather than targeting a desired rate of return, even an eminently reasonable one, investors should target risk. — Seth Klarman

The government can always rescue the markets or interfere with contract law whenever it deems convenient with little or no apparent cost. (Investors believe this now and, worse still, the government believes it as well. We are probably doomed to a lasting legacy of government tampering with financial markets and the economy, which is likely to create the mother of all moral hazards. The government is blissfully unaware of the wisdom of Friedrich Hayek: "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.") — Seth Klarman

If you've just stared into the abyss, quickly forget it: the lessons of history can only hold you back. — Seth Klarman

By investing at a discount, Benjamin Graham knew that he was unlikely to experience losses. — Seth Klarman

In the financial markets, however, the connection between a marketable security and the underlying business is not as clear-cut. For investors in a marketable security the gain or loss associated with the various outcomes is not totally inherent in the underlying business; it also depends on the price paid, which is established by the marketplace. The view that risk is dependent on both the nature of investments and on their market price is very different from that described by beta. — Seth Klarman

Do not trust financial market risk models. Despite the predilection of some analysts to model the financial markets using sophisticated mathematics, the markets are governed by behavioral science, not physical science. — Seth Klarman

Don't short many stocks. Instead they hedge for tail risk with CDS and options. They are happy to incur illiquidity — Seth Klarman

Courage is a function of process. — Seth Klarman

In contrast to the speculators preoccupation with rapid gain, value investors demonstrate their risk aversion by striving to avoid loss. — Seth Klarman

The government can reasonably rely on debt ratings when it forms programs to lend money to buyers of otherwise unattractive debt instruments. — Seth Klarman

Why should the immediate opportunity set be the only one considered, when tomorrow's may well be considerably more fertile than today's? — Seth Klarman

I know of no long-time practitioner who regrets adhering to a value philosophy; few investors who embrace the fundamental principles ever abandon this investment approach for another — Seth Klarman

In investing it is never wrong to change your mind. It is only wrong to change your mind and do nothing about it. — Seth Klarman

One must understand the importance of an endless drive to get information and seek value. — Seth Klarman

Never stop reading. History doesn't repeat, but it does rhyme. — Seth Klarman

Things that have never happened before are bound to occur with some regularity. You must always be prepared for the unexpected, including sudden, sharp downward swings in markets and the economy. Whatever adverse scenario you can contemplate, reality can be far worse. — Seth Klarman

It is always easiest to run with the herd; at times, it can take a deep reservoir of courage and conviction to stand apart from it. Yet distancing yourself from the crowd is an essential component of long-term investment success. — Seth Klarman

You need humility to say 'I might be wrong.' — Seth Klarman

Always look for forced urgent selling. — Seth Klarman

Most investors are primarily oriented toward return, how much they can make and pay little attention to risk, how much they can lose. — Seth Klarman

Nowhere does it say that investors should strive to make every last dollar of potential profit; consideration of risk must never take a backseat to return. Conservative positioning entering a crisis is crucial: it enables one to maintain long-term oriented, clear thinking, and to focus on new opportunities while others are distracted or even forced to sell. Portfolio hedges must be in place before a crisis hits. One cannot reliably or affordably increase or replace hedges that are rolling off during a financial crisis. — Seth Klarman

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