The cost of performing well in bad times can be relative underperformance in good times.
Seth KlarmanOne must understand the importance of an endless drive to get information and seek value.
Seth KlarmanThe average person canโt really trust anybody. They canโt trust a broker, because the broker is interested in churning commissions. They canโt trust a mutual fund, because the mutual fund is interested in gathering a lot of assets and keeping them. And now itโs even worse because even the most sophisticated people have no idea whatโs going on.
Seth KlarmanDo not trust financial market risk models. Despite the predilection of some analysts to model the financial markets using sophisticated mathematics, the markets are governed by behavioral science, not physical science.
Seth KlarmanWe continue to adhere to a common-sense view of risk - how much we can lose and the probability of losing it. While this perspective may seem over simplisticor even hopelessly outdated, we believe it provides a vital clarity about the true risks in investing.
Seth KlarmanUnlike return, however, risk is no more quantifiable at the end of an investment that it was at its beginning. Risk simply cannot be described by a single number. Intuitively we understand that risk varies from investment to investment: a government bond is not as risky as the stock of a high-technology company. But investments do not provide information about their risks the way food packages provide nutritional data.
Seth Klarman