Saturday, May 30, 2015

Today's Investing for Survival

 Investing for Survival

            12 things I learned from David Tepper: #3

3. “We won’t stop if we’re down a little bit. We don’t freeze. We keep investing with a disciplined, logical approach.”
Michael Mauboussin points out: “You must recognize that even an excellent process will yield bad results some of the time. If you are going to be the in the business that David Tepper is in you need to stay focused on your process, rather than any specific short term result. If you make an investment and the odds are substantially in your favor and you generate a loss, that is OK as long as your process was sound.
A sound process exists when the process is net present value positive (i.e., genuine investing). If the process is net present value negative, that is gambling/speculation/a fool’s errand. Howard Marks points out the key elements in his process as follows: “a) have an approach b) hold it strongly c) accept that, no matter what, there will be times where your approach doesn’t work, and d) work within your own skill set and personality, not someone else’s.” David Tepper, Howard Marks, John Bogle, George Soros are not you and vice versa. Your investing approach should be consistent with who you are. Everyone is different. In addition to being disciplined and logical, David Tepper believes: “We’re pretty unemotional when we invest” which is a very good thing since most mistakes in investing are based on emotional or psychological errors.

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