Lessons Learned from Seth Klarman

Seth Klarman – Lessons Learned – From a speech at Babson College 3/29/2010

Things that never happen before happen with regularity

You don't have to make every last cent on a holding

Conservative posturing prevents you from pain

Risk is relative to the price paid

Uncertainty is not risk

Never trust in risk models

Markets are driven by behavior not physical sciences

Never take risk in cash investments

Private market value is garbage

A broad and fluid investment approach is critical

It is critical to buy on the way down

It is better to be early than too late

Financial innovation is dangerous

Ratings agencies should never be trusted

Get well paid to take liquidity risk

Public investments are mostly superior to private investments because you can average down

Beware of leverage in all its forms

Match liability and asset duration because it is never safe to assume debt can be rolled over

Financial stocks are particularly risky

Having clients with long term orientations is critical

Pay no attention to government officials that say the problem is contained

The repeated follies of others is what makes the markets inefficient

Other nuggets of wisdom:

"The essence of value investing is behavioral"

"There is no money to be made in macro-economic forecasts"

"Forecasting macro-economic measures and short-term price movements is impossible. Focus what you can control which is your process and approach. Control of your process is critical."

"Don't buy from other good value investors. Buy from panicked sellers"