August 24, 2012 (DJIA 13127.15, S&P500 1409.48)
The few paragraphs below are simple and worthwhile reading from legendary investor Irving Kahn. I have not written much lately, but continue to research our companies as well as looking to maximize our investments, while still keeping a sharp eye on attempting to avoid permanent risks of capital.
How to Play the Market: Irving Kahn
By Irving Kahn on April 12, 2012
"No two recoveries are alike. When I came to Wall Street
in 1928, I thought the market was crazy. It hit the brakes in í29. You have to
be careful to distinguish between one recovery and the other. You stick to
value, to Benjamin Graham, the man who wrote the bible for the market. Itís a
mistake to believe you can do more, I warn you. John Maynard Keynes was one of
the most famous economists in history. He was a genius, but he failed as a macro
investor. It was hard to believe at the time. But when he became a bottom-up
value guy, well, he became very successful. With value investing, you donít have
to bend the truth to accommodate periods with derivatives and manias. Value
investing will almost always be right.
Iíve seen a lot of recoveries. I saw crash, recovery, World War II. A lot of economic decline and recovery. Whatís different about this time is the huge amount of quote-unquote information. So many people watch financial TVóat bars, in the barber shop. This superfluity of information, all this static in the air.
Thereís a huge number of people trading for themselves. You couldnít do this before 1975, when commissions were fixed by law. Itís a hyperactivity that I never saw in the í40s, í50s, and í60s. A commission used to cost you a hell of a lot; you couldnít buy and sell the same thing 16 times a day.
You say you feel a recovery? Your feelings donít count. The economy, the market: They donít care about your feelings. Leave your feelings out of it. Buy the out-of-favor, the unpopular. Nobody can predict the market. Take that premise to heart and look to invest in dollar bills selling for 50Ę. If youíre going to do your own research and investing, think value. Think downside risk. Think total return, with dividends tiding you over. Weíre in a period of extraordinarily low ratesóbe careful with fixed income. Stay away from options. Look for securities to hold for three to five years with downside protection. You hope youíre in a recovery, but you donít know for certain. The recovery could stall. Protect yourself. ó As told to Roben Farzad "