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Roula Khalaf, editor of FT, chooses her favorite story in this weekly newsletter.
The writer is a philanthropist, private investor and co-founder of Pimco
With age, some insights are coming and as we start in 2025, now is the good time like any one to look at some of the lessons from my investment career that served me well.
On the occasion of last year’s post (almost) comprehensive collection of my chances of investing essays Returning in the late 1970s, I allowed myself for a while to think. Not because of the humility of the call I received correctly or wrong, but what can now be drawn from them.
In the big picture, American capitalism in a relatively sense is more reminiscent of the wild west than some economies. Allows you to take over the risk – of course, of course, government and central bank, but flexible enough to promote a modern entrepreneur in search of profit. This promotion envisages, even encourages, risk and innovations. And in most cases, this also allows not only success but also direct failure and bankruptcy. I believe that this lesson is that the investor must recognize and learn as we break through the long -term mountain of management of the portfolio in this “new age”.
The combination of influence and time is crucial for recognizing in any portfolio draft. Improvements can be dangerous, but it is less so enough time to develop a fundamental healthy investment idea. Just ask Warren Buffetta. His belief in the superior capital that returns in the long run is anchored the balance of insurance companies Berksshire Hathaway. The capital of these companies was more or less impermeable to “call” himself in an inappropriate time. Insurance premiums and long-term debt have a semi-grafting for which no subscriber’s loan and capital capital overnight. And so Buffett-Koji should be recognized by his splendor as a financial architect, as well as investor-spurred, while John Meriwether from a long-term notorious capital notes temporarily stumbled in the face of collateral calls to the company’s trade position. Buffett has shown that time is a vital third dimension in financial architecture.
And over time, I learned another valuable lesson, which is that all money managers and bond managers have a responsibility that goes beyond the accumulation of assets, earnings of compensation and exceeding competition. They borrow money to companies, countries and continents, and what they do affect the wealth and life of hundreds of millions, if not billions of people. When irrationality or greed gets an advantage – as they did in the US Crisis savings and loan in the late 1980s or perhaps with dotc bubbles, and now Bitcoin bubbles – then marketEconomies and people can be damaged for years and years.
It also helps to know what is on the mind of other investors because markets, as John Maynard Keynes has long noticed, can be a beauty competition – at least in the short term. Momentum is actually a proven historical generator “alpha”, above the return of the market. But when the productive wave of momentum collapses, the consequences are usually immediate and prices reverse. I learned this early in my career from an incident that included my first and only personalized license plate.
I originally bought a license plate that read “Bonds 1” in an attempt to send a message to the chair of my then employer Pacific Mutual, for which I felt controlling the fate of my next raise and at least a few. If I could drive that car next to his company, I could quickly or at least eventually send a subliminal signal that your truly hot ticket in the bond world – an idea, was the basis of the 1973 fact. Well, the commentary on the “great license plates” never fell from the chair or much on the path of increasing, but “Bonds 1” attracted the attention of some observers.
Several times when I filled my tank for a gasoline at the Viejo mission that year, an interested passerby approached me and asked if I could save their nephew or brother from the Orange County Prison. Then I learned that “Bonds 1” mean different things for different people. It was a reminder that investors also have a very different takeover of property that could be contrary to mine. Experience has shown again and again that it pays me to listen to such views and that people who are watching are key to financial markets. So, as it turns out, one of my most important lessons in the search for master markets came from a reflection in the front of the gas station.
