Seth Klarman Quotes

373 Seth Klarman Quotes

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[In January 2008.] How long might a bull or bear market last? Had you avoided the upward frenzy of 1929 and missed the great crash only to jump into the market in early 1930, the pain you would have felt by 1933 would hardly have been different from the agony of those who had invested at the 1929 peak. We will not be certain until much later whether the so-called bargains of January 2008 were truly undervalued or merely dangerous temptations to value-starved investors.
Seth Klarman

[In July 2008.] Some of the best investments that we’ve ever done - I think most people have ever done - aren’t necessarily attractive in their own right. They’re attractive because the upside versus the downside is compelling, rather than being right that the earnings would come in a certain way. Hunting for an extremely mispriced risk-and-return scenario takes skill and determination.
Seth Klarman

[In July 2008.] Trust has to be earned, not just given
Seth Klarman

[In July 2008.] We usually interview 25 to 50 people for every one we make an offer to. Luckily, we get a high percentage of the ones we make offers to because of our reputation and I guess because of the relatively few funds up in Boston.
Seth Klarman

[In July 2008 on whether investing is an art, a science or a craft?] I would say art first and foremost, craft second, science third. To me, the science of valuing things and of identifying when things sell at a discount is as straightforward as could be.
Seth Klarman

[In July 2008.] One year we interviewed over 50 people and made no offers, so it was like waiting for a cheap stock. You’re waiting for something, and unless you have a massive hole that you have to fill, you have no urgency, so it forces you to have that long-term, craft-like perspective.
Seth Klarman

[In July 2008.] We think more value is added by being generalists and seeing opportunities from a broader perspective. If you have silos, you’re going to own things only within those silos. If you have the broader perspective, you can say, ‘I don’t even like stocks, I’m working on distressed debt,’ or something like that.
Seth Klarman

[In July 2008.] The fact that we’ve been closed for most of our existence has also allowed me to not focus on marketing. We don’t spend a lot of time in client meetings - I think, historically, that’s probably 1% or 2% of our time, at most. That let me focus the great majority of my time on investing.
Seth Klarman

[In July 2008.] You know, I’ve said over and over, I have the best job in the world. I get to do something that is interesting and ever-changing and therefore ever-interesting, working with great people in a great culture… I have nothing I’d rather do other than slam dunk a basketball.
Seth Klarman

[In July 2008.] An investor needs to be able to confront things they’ve never seen before… Virtually none of the companies that Buffett owned from the ’50’s and ’60’s, the little oddball things, are recognizable today. The eras pass and change but the fundamental principles don’t.
Seth Klarman



[In July 2008 on his old boss Max Heine who founded Mutual Shares Corp.] My old boss, Max Heine, was also an important model. He was a very gentle man and a wonderful person in the way he treated people. While he had this huge intellect, while he could have been a tough boss, he was instead a sweetie.
Seth Klarman

[In October 2008.] Since peaking on October 9, 2007, the S&P declined nearly 42% over the ensuring 12 months. The selling panic is accelerating primarily because of growing fear of a severe economic downturn, which would in some cases justify lower prices, and the urgent need by many mutual funds and hedge funds for cash to meet margin calls and redemptions. There is a crush of elephants all trying to get through the revolving door at once.
Seth Klarman

[In October 2008.] In capital markets, price is set by the most panicked seller at the end of a trading day; value, which is determined by cash flows and assets, is not. This is both the challenge and the opportunity of investing: to carefully sift through the markets to find the greatest divergence between price and value, and to concurrently avoid the extreme emotions of the crowd and, indeed, to take a stand against them.
Seth Klarman

[In October 2008.] With each successive day, the interconnectedness of global financial markets becomes increasingly apparent; the ill health of one institution infects the rest, like the falling of one domino toppling successive others.
Seth Klarman

[In October 2008.] In this era of meltdown and bailout, we lament that this whole mess was somewhat predictable… Massive leverage – 25 to 30 times for large investment banks – compounded the cost of even minor mistakes to market-threatening proportions. A highly leveraged financial system is always to some degree a house of cards, vulnerable to a small crack in an obscure part of the foundation. It is shocking, yet in a way not that surprising, that decades of financial excess are being reversed in a matter of weeks.
Seth Klarman

[In October 2008.] For 26 years we have held our cash directly in U.S. Treasury bills or in money market funds that invest only in U.S. Government securities. When we need our cash, we always want it to be there, fully intact. Because we are human and can make mistakes, and because we never want to be forced to sell investments at an inopportune time, we never use recourse leverage on our portfolios. This has been an expensive decision much of the time, in that leverage magnifies returns. But it is not a decision we ever regretted, because the downside risk of leverage is far too great.
Seth Klarman

[In October 2008.] Capital preservation is always far more important than capital enhancement.
Seth Klarman

[In October 2008.] We are not fans of short-selling… because it exposes you to theoretically unlimited loss and involves significant counterparty, systemic, and regulatory risk.
Seth Klarman

[In October 2008.] Over the 26 years we have been in business, Wall Street regularly came calling with fancy new derivatives involving computer models and Greek letters, conceived by their armies of mathematics PhD’s… We simply said no thanks. Most of today’s troubles could have been avoided if more people had had the sense to just hang up the phone.
Seth Klarman

[In October 2008.] When there is no price for incurring excessive risk, more will be borne. When there is no cost for failure, there will be more and more of it. Previous bailouts led to excesses that triggered today’s crisis.
Seth Klarman



[In October 2008.] A downturn is a necessary precursor to an upturn; the seeds of recovery and eventually of substantial profit are sown amidst the carnage. The world is not ending… Successful investing always requires a long-term perspective; this has never been truer than at this moment in time.
Seth Klarman

[In October 2008.] It’s a great time to be a value investor. The competition seems to have gone away.
Seth Klarman

[In October 2008.] Most value investors paint from a broad palette - taking advantage of the best bargains across a variety of industries, countries, and for some, even securities types. They don’t fall in love with companies or their managements. They favor what is undervalued and shun what is overvalued.
Seth Klarman

[In October 2008.] When people start to give something away at a ridiculous price because they have to, not because they want to, that’s a good time to buy.
Seth Klarman

[In October 2008.] It’s a great time to be a value investor...
Seth Klarman

[In October 2008 on government intervention. (The correlations to the stock market in China in July 2015 are worth noting.)] When you don’t allow failure, you get more failure. When you take away the price of personal risk in your decisions, you get much more risk taking. So we are harvesting what we’ve sown. And while I understand the argument for government intervention at this point, I think it’s incredibly important that the government learn how to intervene on both sides. If we’re going to prop things up when they’re down, we perhaps also ought to take away the punch bowl much earlier, so we wouldn’t be in this mess...
Seth Klarman

[In December 2008.] It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic.
Seth Klarman

[In December 2008.] Value investing is intellectually elegant. You’re basically buying bargains… People who chase growth, who chase highfliers, inevitably lose because they paid a premium price. They lose to the people who have more patience and more discipline.
Seth Klarman

[In December 2008 on whether Security Analysis originally published in 1934 was still relevant 75 years later.] At no time since 1934 has it been so relevant given the financial turmoil and distress in the world and the possibility that we could be reliving some sort of serious economic downturn. What’s wonderful about Graham and Dodd is that their advice is timeless. And it is not just about investing; it’s also about thinking about investing. It basically teaches you the questions that you should ask, and it makes endless references to the foibles of human nature in the markets.
Seth Klarman

[In December 2008.] People always want to believe that this time is different, that there’s something new under the sun, and that through their own ingenuity they can wish away risk.
Seth Klarman



[In December 2008 on philanthropy.] I’m a big believer in giving back. We all have an obligation to leave things better than where we found them.
Seth Klarman

[In January 2009.] Without the possibility of near-term pain, there can be no long-term gain.
Seth Klarman

[In January 2009.] When securities decline, it is crucial to distinguish, as possible causes, legitimate reaction to fundamental developments from extreme overreaction. At Baupost, we are always on the lookout for such overreactions, whether due to the disappointing earnings of a failed growth stock, a ratings downgrade of a bond, the deletion of a stock from an index or its delisting from an exchange, or the forced sale resulting from a margin call. Usually, fearful overreaction equals opportunity.
Seth Klarman

[In January 2009.] As Benjamin Graham and David Dodd taught us, financial markets are manic and best thought of as an erratic counterparty with whom to transact, rather than as an arbiter of the accuracy of one’s investment judgments. There are days when the market will overpay for what you own, and other days when it will offer you securities at a great discount from underlying value. If you look to ‘Mr. Market’ for advice, or if you imbue him with wisdom, you are destined to fail. But if you look to Mr. Market for opportunity, if you attempt to take advantage of the emotional extremes, then you are very likely to succeed over time.
Seth Klarman

[In January 2009.] If you see stocks as blips on a ticker tape, you will be led astray. But if you regard stocks as fractional interests in businesses, you will maintain proper perspective.
Seth Klarman

[In January 2009.] While it is always tempting to try to time the market and wait for the bottom to be reached (as if it would be obvious when it arrived), such a strategy has proven over the years to be deeply flawed. Historically, little volume transacts at the bottom or on the way back up and competition from other buyers will be much greater when the markets settle down and the economy begins to recover. Moreover, the price recovery from a bottom can be very swift. Therefore, an investor should put money to work amidst the throes of a bear market, appreciating that things will likely get worse before they get better.
Seth Klarman

[In January 2009.] In today’s difficult environment, money managers must keep firmly in mind that the only things they really can control are their investment philosophy, investment process, and the nature of their client base
Seth Klarman

[In January 2009.] Successful investing requires resolve… One has to be able to stand one’s ground, be unwavering when others vacillate, and take advantage of others’ fear and panic to pick up bargains. But successful investing also requires flexibility and open-mindedness. Investments are typically a buy at one price, a hold at a higher price, and a sale at a still higher price.
Seth Klarman

[In January 2009.] 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

[In January 2009.] Those who reflect and hesitate make far less in a bull market, but those who never question themselves get obliterated when the bear market comes.
Seth Klarman



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