Investing for Survival
12
things I learned from David Tepper: #6
6. “For better or worse we’re a
herd leader. We’re at the front of the pack. We are one of the first movers.
First movers are interesting; you get to the good grass first, or sometimes the
lion eats you.”
To outperform the market you must be contrarian, and you
must be right about that contrarian view often enough so that the financial
math works. But there is big risk and uncertainty in this approach. The good
news is that because most people would rather fail conventionally than succeed
unconventionally assets can sometime be mispriced. Howard Marks, again, is on
the mark: “Non-consensus ideas have to be lonely. By definition, non-consensus
ideas that are popular, widely held or intuitively obvious are an oxymoron.
Thus such ideas are uncomfortable; non-conformists don’t enjoy the warmth that
comes with being at the center of the herd. Further, unconventional ideas often
appear imprudent. The popular definition of “prudent” – especially in the
investment world – is often twisted into ‘what everyone does.’”
Bonus: don’t do what you love (short):http://www.pragcap.com/dont-do-what-you-love
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