New book on investing: “Ever invested. Ever Failed. No matter. Invest again. Invest better”
Ten thoughts, facts and rules :
- 1. Watch out! Events that did not happen in the past, and facts that did not materialize, are usually the best predictors of the future.
- 2. Most politicians are “naked” short-sellers. They sell what they don’t own and usually can’t provide.
- 3. Investment candidates (businesses) should ideally generate a recurrent level of return on equity (greater than the cost capital), as well as a high level of earnings per share growth (greater than operational growth and return on equity).
- 4. If you believe you understand financial statements, keep in mind that those who produce them usually don’t.
- 5. Sad Belgian joke. Banks whose assets were greater than GDP collapsed. Hundreds of years of growth in smoke. Nobody responsible!
- 6. Respect quarterly cycles. Invest on solid businesses (roe, Δeps, Δeps > roe, low peg, regular analysts estimates beats) at the end of their consolidation (bottoming) process. Avoid being invested when quarterly reports are released.
- 7. In today’s low growth environment, the most strategic “products” of any business might be its shares and its bonds.
- 8. As an investor, if you’re willing to pay managers/directors to do nothing, you will be amazed at how well they do it!
- 9. There are two opposing crowds on the market: those who sell what they don’t own (short-sellers), and those who buy what they can’t afford (margin-buyers). Good investors follow them. Great investors lead them.
- 10. Over time, financial markets don’t lie. Never. That’s why people – managers, directors, and leaders of all sorts – hate them!
Ever invested. Ever Failed. No matter. Invest again. Invest better
If you don’t see the link between these ten thoughts, facts and rules, you might consider having a look at Jean-Marie Choffray & Charles Pahud de Mortanges last book: Ever invested. Ever Failed. No matter. Invest again. Invest better. Their book provides a semi-ordered set of several hundred “experience-based” thoughts, facts and rules – allowing for some redundancy and randomness – whose any subset could provide a reasonable basis on which to build your own theory of investing. Painful and solitary work. But, your survival on the markets is at that price.
Protecting assets in non-parametric market conditions
In today’s chaotic economic and political environment, protecting assets, against all extreme – unpredictable, impossible, and even unthinkable – events, is the key to success. As we discussed in our contribution in the Wiley handbook Extreme Events in Finance edited by Prof. Longin, under such non-parametric market conditions, the analysis of the past is of limited help. As to the future, it might never exist! The present is all that matters, and that’s why investors usually become more concerned about the return of their money than about the return on their money. For a comprehensive discussion of this topic, refer to Extreme Events in Finance.
Prof. Jean-Marie Choffray
ESSEC Business School & University of Liège
Charles Pahud de Mortanges
University of Liège