Quotes

Below you will find my personal collection of quotes I deem worthwhile to read and to remember. Mostly they come from famous investors and relate to investment topics. I hope they will provide guidance in difficult (equity market) periods, steady my hand and improve my investment process.

Your Edge

»Excess returns equal skill times opportunity. All the skill in the world is for naught unless you have an opportunity to apply it. Before figuring out how you will win the game, figure out which game to play.« – Michael J. Mauboussin

M. J. Mauboussin, Reflections on the Ten Attributes of Great Investors

»[Investors] will learn an enormous amount in a very short time, quite a bit in the medium term and absolutely nothing in the long term.« – Jeremy Grantham

Jeremy Grantham in the depths of the financial crisis (Baupost Q2 2020)

»Insight makes money […]. Information costs money.« – Pat Dorsey

Par Dorsey, at Texas Lutheran

»If you are on a poker table you want to see people with lots of money doing really dumb things with their cards.« – Jim Chanos

Jim Chanos, (source)

»Markets are going to do what they do. But if you have a sensible idea that’s backed up with a lot of good research, that’s going to give you an edge over the long haul.« – David Booth

David Booth (Dimensional)

»In theory there’s no difference between theory and practice, but in practice there is.« – Yogi Berra

Yogi Berra, The most important thing

»Three minutes’ thought would suffice to find this out; but thought is irksome and three minutes is a long time.« – A.E. Housman, who was confronted with a belief that had no basis

British poet and classicist A.E. Housman (according to Bill miller).

Short term fluctuation

»I don’t know what the stock market is going to do in a day, a week, a month or a year. Anybody who claims he does has to get his brain examined.« – Howard Marks

Howard Marks

»In the stock market, there is only compensation for pain and suffering – first comes the pain and suffering, and then the compensation… .« – Kostolany

Kostolany

»Patterns of price movement are not random. However, they’re close enough to random… .« – Jim Simons

Jim Simons

Believes, opinions and room for error

»However, what I have learned in investing is that what I think should happen doesn’t matter; only what will happen matters.« – Vitaliy Katsenelson

Vitaliy Katsenelson, in Tesla, Elon Musk and the EV Revolution

»It ain’t what you don’t know that gets you into trouble. It’s what you know for certain that just ain’t so.« – Howard Marks

Howard Marks

»Gold is money. Everything else is credit.« – JP Morgan

JP Morgan

»The catalyst for a recession or correction isn’t always foreseeable. It can seemingly appear out of thin air (…)« – Howard Marks

Howard Marks

»The correctness of a decision can’t be judged from the outcome. Nevertheless, that’s how people assess it. A good decision is one that’s optimal at the time it’s made, when the future is by definition unknown. Thus, correct decisions are often unsuccessful, and vice versa.« – Howard Marks

Howard Marks

Forecasts

»We have two classes of forecasters: Those who don’t know — and those who don’t know they don’t know.« – John Kenneth Galbraith

John Kenneth Galbraith (source)

»People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome.« – George Orwell

George Orwell (from uncertainty)

»Forecasts usually tell us more about the forecaster than of the future.« – Warren Buffett

Warren Buffett (from uncertainty)

»Be very wary of false precision… It is much better to be approximately right than precisely wrong.«

»We may never know where we’re going, but we’d better have a good idea where we are.« – Howards Marks

Howards Marks

»Since extrapolation is appropriate [reg. macro forecasts] most of the time, most of the people’s forecasts are roughly correct. But becasue they’re already reflected in security prices, most extrapolation aren’t a source of above average returns. The forecasts that produce great profits are the ones that presciently foresee radical deviations from the past. But that kind of forecast is, firstly, very hard to make and, secondly, rarely right. Thus most forecasts of deviation from trend also aren’t a source of above average returns.« – Howards Marks

Howards Marks, in uncertainty

Risk Aversion

»Our initial analysis of any company always considers the real risks of investing. This is the risk of permanent capital loss. We look hard at balance sheets and stay far away from highly leveraged businesses. This is especially true during periods of deep economic uncertainty like the one we are in now.« – Tweedy, Browne

tweedy.com, in Q1 2020 letter

»Daniel Kahneman says a key to investing is having ‘a well-calibrated sense of your future regret‘ which might actually be the key to understanding all forms of risk.« – Morgan Housel in A Few Things I’m Pretty Sure About

Morgan Housel (collaborative)

»The first rule of investment is: Don’t lose. And the second rule of investment is: Don’t forget the first rule.« – Warren Buffett

Warren Buffett

»At a very big picture: averaging down when you are right is very sweet, averaging down when you are wrong is a disaster.« – John Hempton

John Hempton, brontecapital

»Even in good times, any illusion of certainty is just that.« – Jeff Bezos

Jeff Bezos, 28:49

»I tell my father’s story of the gambler who lost regularly.  One day he hears about a race with only one horse in it, so he bet the rent money.  Halfway around the track, the horse jumped over the fence and ran away.« – Howard Marks

Howard Marks, The most important thing illuminated

»Risk cannot be eliminated; it just gets transferred and spread.« – Howard Marks

Howard Marks

»Never forget the six-foot-tall man who drowned crossing the stream that was five feet deep on average. It’s not sufficient … to survive on average. We have to survive on the bad days.« – Howard Marks

Howard Marks

»There is no such thing as no risk.  There’s only this choice of what to risk, and when to risk it.« – Nick Murray

Nick Murray

Emotions

»You have to be simultaniously confident and humble.« – Whitney Tilson

Whitney Tilson, (talks at google)

»If you want a friend on Wall Street, get a dog.« – Carl Icahn

Carl Icahn

»Fear incites human action far more urgently than does the impressive weight of historical evidence.« – Jeremy Siegel

Jeremy Siegel (Stocks for the long run)

»There is nothing worse for your mental condition than to watch a friend get rich.« – Kindleberger

Kindleberger, from Howard Marks

Businesses and industries

»It is a lot more fun to buy a kitten than to drown it later. If you buy this kitten, you are stuck with it … Once the capacity goes in in these markets it tends to stay in these markets for a long time.« – Bruce Greenwald about the pet and capacity decision

Bruce Greenwald (source)

»Raising prices is a great way to flesh out whether you actually do have a moat… The definition of a moat is the ability to charge more.« – Marc Andreessen

Marc Andreessen

»You should invest in a business that even a fool can run, because someday a fool will.« – Warren Buffet

Warren Buffet

»When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.« – Warren Buffett

Warren Buffett

»An Overview of traditional moats
• Barriers to Entry (Waste Management, Exxon Mobile)
• Network Effects (Facebook, CoStar, Priceline)
• High Switching Costs (SAP, IBM)
• Brand Power (Coke, Apple, Nike)
• Distribution (Wal-Mart, Kraft, Gillette)
• Economies of Scale (Amazon, Costco)
• Low-cost Producer (Bank of America, GEICO)« – Sabre Capital

Sabre Capital

»The world’s worst business is one with high fixed costs, low marginal costs, and lots of competition. In that case the competitive forces will drive prices down to the low marginal costs – and it will be impossible to recover fixed costs.« – John Hempton

John Hempton, brontecapital

(Value) Investing

»It’s not supposed to be easy. Anyone who finds it easy is stupid.« – Charlie Munger

Charlie Munger

»The intrinsic value of a security is the maximum price that an investor would be willing to pay to own the security if she could not ever sell it.« – Philosophical Economics

Philosophical Economics, source

»You can’t have intelligent investing in the absence of quantification of value and insistence on an attractive purchase price.« – Howard Marks

Howard Marks, Mastering the market cycle

»An engineer can have a successful career knowing nothing other than engineering. Same for a chemist, meteorologist, or radiologist. Business and investing don’t work like that. They’re a little math, a little accounting, a little sociology, a little psychology, a few parts marketing, law, politics, game theory, history, statistics, biology, and public relations. That doesn’t make them harder than other fields; just more uncertain, prone to chance, and with fewer experts.« – Morgan Housel in A Few Things I’m Pretty Sure About

Morgan Housel (collaborative)

»Value investing is a lot more than just buying statistically cheap companies that trade at low P/Es. It is a philosophy, a framework. It is about buying companies that are undervalued, and this undervaluation may not be staring you in the face. It is also about availing yourself of positive optionality (significant positive outcomes that are hard to evaluate today) – and most importantly, not paying for them.« – Vitaliy Katsenelson

Vitaliy Katsenelson, kidnapped email-series, part 5

»Proper valuations are far more art than science. DCF valuations – especially of something growing near or above the discount rate are famously sensitive to assumptions. The right comparison is to the Hubble Telescope: move direction a fraction of a degree and you wind up in another galaxy.« – John Hempton

John Hempton, brontecapital

»All of the information is in the past, but all of the value is in the future.« – Bill Miller

Bill Miller, taken from Pat Dorsey

»You are looking for things that are ugly, cheap, boring, out of fashion, small and obscure or otherwise on the other side of the existing finance industry mania.« – Bruce Greenwald on buying the opposite of glamour stocks

Bruce Greenwald (source)

Bets and odds

»What good poker players and good decision-makershave in common is their comfort with hte world being an uncertain and unpredictable place. They understand that they can almost never know exactly how something will turn out. They embrace that uncertainty and, instead of focusing on being sure, they try to figure out how unsure they are, making their best guess at the chances that differnet outcomes will occur.« – Howard Marks

Howard Marks, quoting Annie Duke (Thinking in Bets) in his memo uncertainty

»I’ve learned many things from George Soros, but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong. The few times that Soros has ever criticized me was when I was really right on a market and didn’t maximize the opportunity.« – Stanley Druckenmiller

Stanley Druckenmiller

Price, value and catalysts

»Price is what you pay. Value is what you get.« – Benjamin Graham

Benjamin Graham

»In the short-run, the market is a voting machine… but in the long-run, the market is a weighing machine.« – Benjamin Graham

Benjamin Graham

»being early and being wrong look the same.« – Whitney Tilson

Whitney Tilson, (talks at google)

»We can always find great companies, but we are looking to buy great companies at valuations that can withstand the headwind of a very uncertain economy.« – Vitaliy Katsenelson

Vitaliy Katsenelson, contrarianedge.com

»Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren’t certain that you understand and can value your business far better than Mr. Market, you don’t belong in the game.« – Warren Buffett

Warren Buffett, 1987 letter to Berkshire Hathaway shareholders

»If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get.« – Charlie Munger

Charlie Munger (Interview with BBC)

»The Bottom is the day before the recovery begins. Thus it’s absolutly impossible to know when the bottom has been reached … ever. Oaktree explicitly rejects the notion of waiting for the bottom; we buy when we can access value cheap.« – Howard Marks

Howard Marks (Letter to Investors, March 2020)

»Investment performance is what happens when a set of developments – geopolitical, macroeconomic, company-level, technical and psychological – collide with an extant portfolio. Many futures are possible […] but only one future occurs.« – Howard Marks

Howard Marks, The most important thing

»The stock market is filled with individuals who know the price of everything, but the value of nothing.« – Phillip Fisher

Phillip Fisher

»Success in investing doesn’t come from buying good things, but from buying things well, and it’s important to know the difference. « – Howard Marks

Howard Marks (you bet)

»For most investors if a stock starts behaving in a way that is different from what they think it ought to be doing—say, it falls 15%—they will probably sell. In our case, when a stock drops and we believe in the fundamentals, the case for future returns goes up.« – Bill Miller

Bill Miller, CIO of Miller Value Partners (link)

»What’s the catalyst? – I don’t need one. Good things tend to happen to cheap assets.« – Jim Grant

Jim Grant

»Specific, known catalysts are not necessary. Sheer, outrageous value is enough.« – Michael Burry

Michael Burry, Scion (source)

General Stock Market

»Whatever happens in the stock market today has happened before and will happen again.« – Jesse Livermore

Jesse Livermore

»Guess what, if you are waiting for the world to be calm, stocks to be cheap, the perfect political atmosphere, and complete certainty about the future before you invest then, my friend, you’re going to be waiting a very long time.« – Bull & Baird

Bull & Baird blog

»It’s a market of stocks, not a stock market.« –

Currently unknown. (I know this quote. Pls comment if you know who said this!)

»In bear markets, stocks return to their rightful owners.« – J.P. Morgan

J.P. Morgan

»We see the latest correction not as a disaster, but as an opportunity to acquire more shares at low prices. This is how great fortunes are made over time.« – Peter Lynch

Peter Lynch

»Everyone has a plan until they get punched in the mouth.« – Mike Tyson

Mike Tyson

»Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.« – Stanley Druckenmiller

Stanley Druckenmiller

»More people lost money waiting for corrections and anticipating corrections than the actual corrections.« – Peter Lynch

Peter Lynch

»Only when the tide goes out do you discover who’s been swimming naked.« – Warren Buffet

Warren Buffet

»It is indeed true that the stock market can forecast the business cycle.« – Paul Samuelson

Paul Samuelson

Investing vs Speculation

»What is investing? One way to think of it is as bearing risk in pursuit of profit. Investors try to position portfolios so as to profit from future developments rather than be penalized by them.« – Howard Marks

Howard Marks, Master the Market Cycles

»High absolute return is much more recognizable and titillating than superior risk-adjusted performance. That’s why it’s high-returning investors who get their pictures in the papers.« – Howard Marks

Howard Marks, The most important thing

»Someone is sitting in the shade today because someone planted a tree a long time ago!« – Warren Buffet

Warren Buffet

»A good decision is one that a logical, intelligent and informed person would have made under the circumstances as they appeared at the time, before the outcome was known.« – Howard Marks

Howard Marks (taken from Vitaliy Katsenelson, contrarianedge.com)

»They don’t ring a bell at the bottom.« – Vitaliy Katsenelson

From an email of Vitaliy Katsenelson (contrarianedge.com, IMA)

»Compound interest is the eighth wonder of the world.
He who understands it, earns it … he who doesn’t … pays it.« – Albert Einstein

Albert Einstein

»Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That is what we’re trying to do. It’s imperfect but that’s what it’s all about.« – Warren Buffett

Warren Buffett

»Do not underestimate the value of doing nothing … .« – A. A. Milne

A. A. Milne

»Investing is the art of positioning capital so as to profit from future developments.« – Howards Marks

Howards Marks (in his memo uncertainty)

»Good business, good management, good price.« – Warren Buffet

Warren Buffet

»Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.« – Paul Samuelson

Paul Samuelson

»I believe, in the stock market – that’s one of my fields – that most people are irrational. And to be irrational, you can be irrational in so many different ways that, practically, the result is indeterminate.« – Paul Samuelson

Paul Samuelson

»I have one guy who has a Ph.D. in finance. We don’t hire people from business schools. We don’t hire people from Wall Street. We hire people who have done good science.« – Jim Simons

Jim Simons

»Investing is about putting the odds of success in your favor.« – collaborative

collaborativefund.com

Industries and Trends

»Sooner or later the Internet will become profitable. It’s an old story played before by canals, railroads and automobiles.« – Paul Samuelson

Paul Samuelson

Other Topics

Below I list some quotes belonging to topics besides investing, some of them much more important to mankind then optimizing returns and our investment strategies

»… All we have to decide is what to do with the time that is given to us.«
– J.R.R. Tolkien

J.R.R. Tolkien – The Lord of the Rings

»Not everything that counts can be counted … and not everything that’s counted truly counts.« – Albert Einstein

Albert Einstein

»It’s 24 hours before your birth, and a genie appears to you. He tells you that you can set the rules for the world you’re about to enter — economic, social, political — the whole enchilada. Sounds great, right? What’s the catch?
Before you enter the world, you will pick one ball from a barrel of 6.8 billion (the number of people on the planet). That ball will determine your gender, race, nationality, natural abilities, and health — whether you are born rich or poor, sick or able-bodied, brilliant or below average, American or Zimbabwean.
This is what I call the ovarian lottery. You’re going to get one ball out of there, and that is the most important thing that’s ever going to happen to you in your life. That’s a good perspective to have when setting the rules for our world.
We should be designing a society that doesn’t leave behind someone who accidentally got the wrong ball and is not well-wired for this particular system.«
– Warren Buffett

Warren Buffett

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