Below are some exceprts from Oaktree Capital Management L.P. Chairman, Howard Marks regarding the current market. The memo dated 15th October 2008. Click here to view full memo..... You need to download pdf file read to view it. Click here to download pdf reader.
"But in dealing with the future, we must think about two things: (a) what might happen and (b) the probability it will happen. During the crisis, lots of bad things seemed possible, but that didn’t mean they were going to happen. In times of crisis, people fail to make that distinction."
"In general, following the beliefs of the herd – and swinging with the pendulum – will give you average performance in the long run and can get you killed at the extremes."
"The message of The Black Swan is how important it is to realize that the things everyone rules out can still come to pass. That might be generalized into an understanding of the importance of skepticism. I’d define skepticism as not believing what you’re told or what “everyone” considers
true. In my opinion, it’s one of the most important requirements for successful investing. If you believe the story everyone else believes, you’ll do what they do. Usually you’ll buy at high prices and sell at lows. You’ll fall for tales of the “silver bullet” capable of delivering high returns without risk. You’ll buy what’s been doing well and sell what’s been doing poorly. And you’ll suffer losses in crashes and miss out when things recover from bottoms. In other words, you’ll be a conformist, not a maverick (an overused word these days); a follower, not a contrarian."
"Skepticism is what it takes to look behind a balance sheet, the latest miracle of financial engineering or the can’t-miss story. The idea being marketed by an investment banker or
broker has been prettied up for presentation. And usually it’s been doing well, making the tale more credible. Only a skeptic can separate the things that sound good and are from the things that sound good and aren’t. The best investors I know exemplify this trait. It’s an absolute necessity."
"Skepticism and pessimism aren’t synonymous. Skepticism calls for pessimism when optimism is excessive. But it also calls for optimism when pessimism is excessive. I’ll write some more on the subject, but it’s really as simple as that."
"I found very few who were optimistic; most were pessimistic to some degree. Some became genuinely depressed – even a few great investors I know. Increasingly negative tales of the coming meltdown were exchanged via email. No one applied skepticism, or said “that horror story’s unlikely to be true.” Pessimism fed on itself. People’s only concern was bullet-proofing their portfolios to get through the coming collapse, or raising enough cash to meet redemptions. The one thing they weren’t doing last week was making aggressive bids for securities. So prices fell and fell – the old expression is “gapped down” – several points at a time. The key – as usual – was to become skeptical of what “everyone” was saying and doing. One might have said, “Sure, the negative story may turn out to be true, but certainly it’s priced into the market. So there’s little to be gained from betting on it. On the other hand, if it turns out not to be true, the appreciation from today’s depressed levels will be enormous. I buy!” The negative story may have looked compelling, but it’s the positive story – which few believed – that held, and still holds, the greater potential for profit."
"Most people don’t repeat their mistakes; they make new ones."
"That’s the main reason why we shouldn’t expect there to be any limit on the resources thrown at the problem. All it will take is running the printing presses long enough to rebuild financial institutions’ capital accounts, make good guarantees and enable borrowers to roll over their outstanding debt, all of which is reckoned in nominal terms. The philosophical bridge of unlimited aid to private institutions appears to have been crossed, and printing the necessary money is unlikely to be an issue."
"In the longer term, we have to wonder about the effect on the world of a glut of newly printed dollars, sterling and euros. The reason owning printing presses makes repayment easy is that it lets a nation cheapen its currency. But one would think that more units of currency per unit of GDP means a debasement of the currency, and thus reduced purchasing power (read: higher inflation).
Walking along Hyde Park on Sunday, I saw a street vendor selling old stock certificates.
Do you have any banknotes, I asked? Anything from the Weimar Republic? For the last
few weeks, I’ve wanted to get some of those.
In Weimar Germany, the government enabled itself to pay World War I reparations by
cheapening its currency . . . literally. So the 1,000 mark note I bought was simply overstamped
One Million Marks in red. Voila! Now we’re all rich.
The mark fell from 60 to the U.S. dollar in early 1921 to 320 to the dollar in early 1922
and 8,000 to the dollar by the end of 1922. It’s hard to believe, but according to
Wikipedia (user-maintained and perhaps not always the most authoritative):
In December 1923 the exchange rate was 4,200,000,000,000 Marks to 1
U.S. dollar. In 1923, the rate of inflation hit 3.25 x 106 percent per month
(prices double every two days).
One of the firms printing these [new 100 trillion Mark] notes submitted an
invoice for 32,776,899,763,734,490,417.05 (3.28 x 1019, or 33 quintillion)
Marks. [That’s not a misprint.]
Lord Keynes judged the situation this way:
The inflationism of the currency systems of Europe has proceeded to
extraordinary lengths. The various belligerent governments, unable, or too
timid or too short-sighted to secure from loans or taxes the resources they
required, have printed notes for the balance.
But it’s not that easy. People with things to sell aren’t that stupid. So instead of 1,000
marks, a goat now costs one million marks. That piece of paper used to be a thousand
mark note – and now it’s a million mark note – but it still buys the same goat.
The benefit to the government is that it’s able to pay off its old nominal debts in currency
of which it suddenly has a lot more . . . but which no longer has much purchasing power.
So when repaid in the cheapened currency in 1923, the person to whom the government
owed 1,000 marks can only buy one-thousandth of a goat – not a whole goat as in 1920.
My late friend Henry Reichmann was a boy then, working as a busboy in a restaurant in
Berlin. He told me he used to be paid at lunchtime and immediately ran out to spend his
salary, since it would buy less if he waited until after work to shop.
That’s hyperinflation. Just as the Great Depression became a model during the credit
crisis, Weimar Germany gives us something to think about regarding our new future.
I’m not smart enough to know what’s coming, but I’m also not dumb enough to
think a few government actions on Monday were enough to solve all our problems.
At best, we usually substitute one problem for another – usually one later on in lieu of
today’s.
I don’t know what to do about this risk, whether it’ll come home to roost, or to what
extent. And I certainly don’t think hyperinflation can be assigned a high enough
probability to make it worth doing much about. But it may cause one to rethink holdings
of low-yielding, flight-to-quality-elevated, long-term Treasurys."
"I’ve believed for many years that just as success carries within itself the seeds of failure (see 2003-08), so does failure carry the seeds of success."
"a forest fire: a year after, bright green shoots grow from the ashes; in fact, I think they’re fertilized by the ashes."
"a quote from Warren Buffett, and often it’s the same one:
The less prudence with which others conduct their affairs, the greater the
prudence with which we should conduct our own affairs."
"When others conduct their affairs with excessive negativism, it’s worth being positive."
"That doesn’t mean it can’t decline further, or that a bull market’s about to start. But it does mean the negatives are on the table, optimism is thoroughly lacking, and the greater long-term risk probably lies in not investing."
Note: Oaktree Capital Management L.P. is a fund manager that HQ based in US and manages USD 54.5 Billion assets.
Saturday, October 18, 2008
Monday, October 13, 2008
Face Off Again?
9月29日,沃伦?巴菲特宣布以每股港币8元的价格认购2.25亿股比亚迪公司的股份,约占比亚迪总股本的10%。受此影响,比亚迪股价大涨,港股及国内A股相关概念炒作不断。
显然,关注比亚迪的并非只有巴菲特一人。理财周报独家获悉,就在此前两天,国内曾有多家基金公司前往比亚迪进行了考察。当然,他们并不晓得巴菲特认购之事。
有趣的是,这些很多事后追捧巴菲特价值投资的国内投资人士,在当时恰恰做出了与巴菲特完全相反的判断。他们认为比亚迪估值偏高,需谨慎买入。
考察完比亚迪,十几位基金公司人士的总体感觉是,比亚迪虽然基本面尚好,但人员流失严重,原材料成本上升。上半年虽然收入增加,但因成本上升缘故, 利润也在下降。因此,感觉比亚迪与其他同类企业一样,基本上没有摆脱本年度整体经济下行的大环境。而且估值也不低。因此,基金公司的判断是“买入有风险, 需谨慎。”
在基金公司作出判断几个小时后,就有消息传出巴菲特将要出手。很多分析师的态度一下子又有了180度大转弯。
2007年9月以来,受与富士康诉讼案的影响,比亚迪的股价步入下滑通道,从77港元的最高点一路下跌到8.4港元。
股价的下跌强化了市场上的质疑,2008年9月初,BNP百富勤发布的研报称,比亚迪的汽车业务扩张速度令该行担忧其盈利能力;另一方面,其子公司比亚迪电子(0285.HK)的手机业务贡献,虽然正进一步扩张,但不及预期强劲,该行给予比亚迪“减持”的评级。
“华尔街多少年?中国资本市场才几年?”上述投资总监说道,“国内证券从业人员毕竟经历的太少,在大牛大熊的转换间还是缺少经验。很多公司的分析师年纪都很小,甚至是80后。没有经历过经济周期的人,你让他们如何能够作出正确的判断?”
“另外,国内的很多投资者会受到制度上的制约。特别是基金经理要受到短期排名和基准业绩比较的羁绊。公司不会给你很多的时间,让你去做长期投资。”该投资总监称。“从这个角度上看,中国和外国的基金公司都差不多。共同基金受到赎回的压力,对冲基金受到投资人的压力。"read more, click here.....
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