As I write this today, many of my clients who consider themselves to be conservative, long-term investors are holding positions in what most people would characterize as risky investments. Securities that represent commodities like coffee and natural gas. Foreign stock markets like Greece and Spain. Junk bonds. Foreign junk bonds. You get the picture.
These investments have been made on my advice. As someone charged with the responsibility of ensuring that the investments I make or recommend be suitable for that person, these are not decisions that have been made lightly. In fact, these investments are made precisely because of that responsibility.
Conventional wisdom says that a conservative long-term investor that is primarily interested in the preservation of capital should hold mostly bonds. History tells us that this approach may seriously underestimate the substantial, long-term risks of that advice. Continue reading
Originally published 12/16/2009
In the Pine Barrens episode from the third season of The Sopranos, Paulie & Christopher think they have killed a Russian mobster and travel to the Pine Barrens of New Jersey to dispose of the body. After arriving, they open the trunk to find him still alive. Ultimately the Russian escapes while Paulie & Christopher become hopelessly lost in the woods. Paulie calls Tony to report what has happened: Continue reading
Originally published 2/23/2009
On June 28, 1914 Gavrilo Princip was one of seven assassins spaced along the Appel Quay in Sarajevo waiting for the motorcade of the Archduke Ferdinand. The first of the seven lost his nerve as the cars passed. The second rolled a grenade under the royal car, but the bomb had a long fuse and exploded under the next car in line. Naturally, panic ensued and the rest of the motorcade sped off before another assassination attempt could be made. Continue reading
Originally published 1/29/09
Remember the “battle of wits” between Vizzini and Westley in The Princess Bride?
Man in black: [turning his back, and adding the poison to one of the goblets] Alright, where is the poison? The battle of wits has begun. It ends when you decide and we both drink – and find out who is right, and who is dead. Continue reading
Originally published 12/05/2008
Today (12/05/08), in Zurich, there is a hedge fund conference in session. A gathering of scores of very smart investment minds against a backdrop of epic market turmoil is bound to produce some interesting quotes. I kind of like this one from the CEO of a hedge fund consultancy: In response to a question regarding how he would adjust risk management systems in light of recent events, he responded; Continue reading