January 29, 2019

Doug Kass praises Seth Klarman

Doug Kass has professed his admiration for Seth Klarman saying that Mr Klarman may be as great as Warren Buffett in investing.

Below is a summary of Mr Klarman's January 2019 Letter outlining 2018 in review.

- Value investors should have a game plan that ignores making emotional moves. Value investors should keep a long term view for investments.

- The markets can be volatile and known facts such as upcoming Federal Reserve rate hikes, Trade War move markets downwards when they were once ignored.

- Index investing continued to grow up thru 2018.

- 2018 was much more volatile for US stocks than 2017

- For governments, political reasons favor borrowing money  instead of managing finances responsibly. This could cause Debt to GDP ratios to grow larger and might be a cause for a major financial crisis.

- Algorithm stock trading is growing and questions can be asked as to how the algorithms could respond to higher volatility and difficult market conditions.

- Small cap companies and small cap stocks could suffer more in a bear market.

- The Q4 2018 market sell off could have been a good buying opportunity due to lowered valuations.

- Some ways to maintain a good long term portfolio is to make fact based decisions, diversify, and avoid leverage.

- When their share prices drop, investors should see the price drops as a new opportunity to buy the shares at a lower price instead of a seeing it as a mistake.