Wit & Wisdom Fall 2017


“Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity.”

- Howard Marks

Previous Quotes

“Buffett and Graham on Quants. Wise beyond their time?

“Mathematics is ordinarily considered as producing precise and dependable results; but in the stock market the more elaborate and abstruse the mathematics the more uncertain and speculative are the conclusions we draw therefrom. In forty-four years of Wall Street experience and study I have never seen dependable calculations made about common-stock values, or related investment policies that went beyond simple arithmetic or the most elementary algebra. Whenever calculus is brought in, or higher algebra, you could take it as a warning signal that the operator was trying to substitute theory for experience, and usually also give to speculation the deceptive guise of investment.” Benjamin Graham/The Intelligent Investor (1949)
“In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behavior of stocks and markets.” Warren Buffett (1987)

- John Maynard Keynes

“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”

- John Maynard Keynes

“In the event Donald wins, I have no doubt in my mind the market tanks, if the polls look like there's a decent chance that Donald could win, I'll put a huge hedge on that's over 100% of my equity positions... that protects me just in case he wins.”

- Mark Cuban

“The idea of expanding into areas like equities might be a good thing to think about,” yet is not “something we need now,” Yellen said, noting that (for now) The Fed is more restricted in which assets it can purchase than other central banks. “If we found, I think as other countries did, that they could reach the limits in terms of purchasing safe assets like longer-term government bonds, it could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions.”

- Janet Yellen

“Value investors must be strong and resilient, as well as independent-minded and sometimes contrary. You don't become a value investor for the group hugs. Indeed, one can go long stretches of time with no positive reinforcement whatsoever. Unlike some other fields of endeavor, in investing you can do the same thing as yesterday but achieve completely different reported results. In the long run, the research and analysis you perform should overcome market forces; the fundamentals ultimately matter. But in the short run, markets can trump effort and insight.”

- Seth Klarman

“There is only one combination of facts that makes it advisable for a company to repurchase its shares: First, the company has available funds — cash plus sensible borrowing capacity — beyond the near-term needs of the business and, second, finds its stock selling in the market below its intrinsic value, conservatively calculated.”

- Warren Buffett

“It's a great time to be a value investor. The difference between the Russell value and growth index returns is tremendous right now—more than nine percentage points. You have to go back to 1998 and 1999 to see that type of discrepancy. We go through these periods where valuations don't matter, but have seen repeatedly that ultimately stock prices reflect the underlying value of corporations.”

- John Buckingham, Al Frank Management

“When any method for selecting stocks becomes popular, then switch to unpopular methods.”

- Sir John Templeton

“Experience teaches us that one of the most common errors in selecting stocks for purchase, or for sale, is the tendency to emphasize only the most obvious factor; namely the temporary outlook for sales and profits of the company.”

- Sir John Templeton

“On Fed tightening: “If financial conditions tighten a lot, then presumably we're going to slow down or we're going to pause for a while," he said. “Conversely, if the market doesn't react at all—stock market goes up, bond market doesn't move—presumably we're going to want to do more (tightening)"

- William Dudley

“The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price."

- Benjamin Graham

“The more dependent the valuation becomes on anticipations of the future — and the less it is tied to a figure demonstrated by past performance — the more vulnerable it becomes to possible miscalculation and serious error."

- Benjamin Graham

“When will these guys ever learn that maybe, just maybe, these Fed policies aimed at targeting asset prices at levels above their intrinsic value is probably not in the best interests of the nation."

- Dr. Josef Lakonishok
LSV Asset Management

“Value investing works because it is contrary to naïve strategies of other investors, which include extrapolating past earnings growth too far into the future and assuming that a well-run company will always be a good investment, regardless of price."

- Dr. Josef Lakonishok
LSV Asset Management

“Several (Fed Officials) commented on the rise in forward price-to-earnings ratios for some small-cap stocks, the increased level of equity repurchases, or the rise in margin credit."

- Minutes from Federal Open Market Committee
Meeting held December 17-18, 2013

“There are two times in a man's life when he should not speculate: When he can't afford it, and when he can."

“OCTOBER: This is one of the peculiarly dangerous months months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February."

- Mark Twain
Pudd'nhead Wilson's New Calendar

“But this time is never different. History always rhymes. Human nature never changes. You should always be more skeptical of any investment that has soared in price, and you should always be more enthusiastic about any asset that has recently fallen in price."

- Jason Zweig
Wall Street Journal

“Ben Bernanke is the Wizard of Oz of the financial world, pulling on monetary levers behind the scenes to drive a 14% increase in equity prices duringhte past year despite corporate earnings that are only up 4%. It's not the improvement in earnings that's driving equities. The 87% correlation between the Fed's balance sheet and the S&P 500's five hundred point rally indicates the U.S. central bank had much to do with it."

- David Rosenberg


There is a systematic manipulation of values carried out by our central banks world over. They sit on money market interest rates, they muscle around the yield curve, and they levitate asset prices on the theory that higher stock and corporate bond prices will make us happier and more inclined to spend."

- James Grant


I want to be clear - While I think we can make a meaningful and significant contribution to reducing this problem, we can't solve it. We don't have tools that are strong enough to solve the unemployment problem."

- Dr. Ben Bernanke (9/11/12)
Federal Reserve Chairman


Interestingly, we have beaten the market quite handsomely over this time frame, although beating the market has never been our objective. Rather, we have consistently tried not to lose money and, in doing so, have not only protected on the downside but also outperformed on the upside."

- Seth Klarman


“Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system and it is not functioning properly."

- Jeremy Grantham, CMO


“Today people who hold cash equivalents feel comfortable. They shouldn't. they have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."

- WarrenBuffet


“While it is always tempting to try to time the market and wait for the bottom to be reached (as if it would be obvious when it arrived), such a strategy has proven over the years to be deeply flawed. Historically, little volume transacts at the bottom or on the way back up, and competition from other buyers will be much greater when the markets settle down and the economy begins to recover. Morever, the price recovery from a bottom can be very swift. Therefore, an invester should put money to work amidst the throes of a bear market, appreciating that things will likely get worse before they get better."

- Seth Klarman
2006 Baupost Letter

“Investment success also requires remembering that securities prices are not blips on a Bloomberg terminal but are fractional interests in - or claims on - companies. Business fundamentals, not price quotations, convey useful information. With so many market participants fixated on short-term investment performance, successful investing requires a focus not on how one is doing, but on corporate balance sheets and income and cash flow statements."

- Seth Klarman
2010 Baupost Letter

“This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."

- Ben Bernanke
November, 4, 2010
Washington Post, Op/Ed


“Having great clients is the real key to investment success. It is probably more important than any other factor in enabling a manager to take a long-term time frame when the world is putting so much pressure on short term results."

- Seth A. Klarman
President, Baupost Group


“Mr. Market delights in switching labels. When he thinks nobody's looking, he sticks the "risky" label on the "safe" asset, and the "safe" label on the "risky" asset. Yet, not infrequently, it's the supposedly risky asset that winds up preserving capital or even delivering capital gains. It all depends on price.”

- James Grant

When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990's and the housing bubble of the early 2000s” he went on. "But the US Treasury Bond bubble of late 2008 may be regarded as almost equally extrondinary."


- Warren Buffet
February 28, 2009


“The best investors do not focus on returns; they focus on risk.”


- Seth Klarman


“Interest rates are at zero, there's $2 trillion plus on the Federal Reserve's balance sheet, and yet the economy is still losing jobs. What exactly is the stock market romancing?”


- Bill Gross


“I had cataract operation on my left eye about a month ago and I thought that maybe now I'll be able to see green shoots. We're not seeing them. Whether it's a retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we've never seen it for a simple thing like electricity. So it hasn't happened yet. It will happen. I want to emphasize that. But it hasn't happened yet.”


- Warren Buffet

"Finally, be aware that the market does not turn when market participants begin to see the light at the end of the tunnel. It turns when all looks black, but just a subtle shade less black than the day before."

- Jeremy Grantham
Chairman - GMO, LLC

"I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether sotcks will be higher or lower a month - or a year - from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over."

- Warren Buffet
NY Times OpEd 10/16/08

"Corrections are not bad. The market correction process eliminates irrational competitors. There were a number of poorly managed situations and poorly made financial decisision during the real estate boom. It is important that any rules post "resuce" punish the poorly run institutions and not punish the well rund companies."

- John Allison

Expert from letter to Congress on the $700 billion bailout

Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed's policy on money supply, foreign investment, the move-ment of the constellations through the heaven and the moss on the oak trees, and they can't predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack."

- Peter Lynch
One Up On Wall Street

Clearly, the recession that hasn't begun yet is over. At least, that's what all the folks who never saw the recession coming, then decided we were going to have one, and who now say it's over, believe. I know because I heard them say so on TV, time and again.

- Helene Meisler


“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing."

- Chuck Prince / CEO of Citigroup
July 9, 2007 - Financial Times Interview


ÏIt is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions."

- Ben Bernanke
August 2007


"Not only is the strategic case for small cap investing highly dubious, the tactical case is truly appalling.  Currently in both Europe and the US, small caps trade at a substantial premium to large capsÛthe liquidity premium is negative. Investors are paying for the pleasure of holding illiquid stocks! This makes no sense to us. To believe in a negative liquidity premium you must believe small caps are less risky, less cyclical, and less idiosyncratically exposed than large caps!Ó

- James Montier / Dresdner Kleinwort


A company with more cash than it needs more often than not uses it in such as way as to reserve the problem.

- Malcolm  Forbes

We still believe that the best opportunities in the market are the fallen growth stocks: stocks that have performed poorly over the past five years but whose businesses have continued to perform well. We believe these are still growth companies, but based on stock performance, they now look more like value stocks.

- Bill Nygren
Oakmark Funds



"A wonderful thing about having an approach grounded in Ben Graham's "margin of safety" discipline is that you don't have to be clairvoyant, and try to predict the direction of the market.  Valuation becomes your barometer leading you into stocks as attractive prices present themselves and out of stocks as they approach their intrinsic values."


-  Tweedy Browne Funds, 2nd Qtr Report to Shareholders


Responding to Bush nomination as Federal Reserve Chairman:  ÏIf I'm confirmed to this position, my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years."

- Ben Bernanke
October 24, 2005


"When we buy a large cap, we hear: How can you buy that dog? It has done nothing for five years."

 - Ron Muhlenkamp
Muhlenkamp Fund


ÏSo you do get an occasional opportunity to get into a wonderful business thatÌs being run by a wonderful manager. And, of course thatÌs hog heaven day. If you donÌt load up when you get those opportunities, itÌs a big mistake.Ó

- Charles Munger
May 5, 1995

Make no mistake about it, the froth in the U.S. housing market is about to lose its effervescence; the bubble is about to become less bubbly.

- William H. Gross, Managing Director, PIMCO
October, 2005

"One fairly dependable sign of the approaching end of a bull swing is the fact that new common stocks of small and nondescript companies are offered at prices somewhat higher than the current level for many medium-sized companies with a long market history. The heedlessness of the public and the willingness of the selling organization to sell whatever may be profitably sold can have only one result - price collapse."

- Benjamin Graham

ÏThe Chinese and Japanese control the 10-year bond rate, and Greenspan controls the short rate.Ó

- Feature on The WorldÌs Greatest Investors Ò Bill Gross
August 2005- SmartMoney Magazine

Standard & PoorÌs Press ReleaseÛ75% of Non-Technology Issues Recover from Post March 2000 Crash (March 8, 2005):

ÏThe massive gains of the late Î90Ìs and the devastating losses resulting from the 2000 crash represent the risk-reward trade off that investors face with every investment. The enormous P/EÌs paid by investors for promised growth in the year 2000, have now been replaced with a more cautious investor who is saying Ïshow me the moneyÓ.

- Howard Silverblatt-Standard & PoorÌs

THE FOOL ME TWICE AWARD: To investors who chased momentum stocks into the heavens last year as if they'd never heard of the crash of 2000. Adding to the 1999 feel of things, penny stocks soared, funky pro forma figures resurfaced and formerly disgraced Internet analysts dusted off their pompoms. All we need now is for a Wall Street strategist to say, "It's different this time."

- Gretchen Morgensen, NY Times -1/1/05

ÏWe shouldn't elect a President; we should elect a magician."

-Will Rogers

"Basic economics-- sometimes the parts are worth more than the whole."

The New Yorker


ÏObservation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions. The purchasers view the current good earnings as equivalent to "earning power" and assume that prosperity is synonymous with safety."

- Benjamin Graham

"Monetary Policy acts a little like vodka-you think it's not working, and then it sneaks up on you."

-Robert McTeer
Federal Reserve Bank-Dallas

"Now that the bear market for stocks has lasted three years, it is well to remember that both bear markets and business depressions are temporary. People do not remain pessimistic forerver."

-Sir John Templeton

"Despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us."  -Warren Buffett, February 21, 2003

"Dennis (Kozlowski) is the best at his job that I've ever seen. He's in a class with General Electric's Jack Welch, and the funny thing is that so few folks have caught on to him yet."

Robert A. G. Monks
Corporate Governance Expert
Barron's Magazine
April 12, 1999

"We have found that many of the crooks look like crooks. They are usually people that tell you things that are too good to be true. They have a smell about them."

-Warren Buffett

"Charlie and I are disgusted by the situation, so common in the last few years, in which shareholders have suffered billions in losses while the CEOs, promoters, and other higher-ups who fathered these disasters have walked away with extraordinary wealth," he wrote. "Indeed, many of these people were urging investors to buy shares while concurrently dumping their own, sometimes using methods that hid their actions. To their shame, these business leaders view shareholders as patsies, not partners."

-Warren Buffett
2001 Berkshire Hathaway Letter to Shareholders

"We don't want anyone to know what's on those books. We don't want to tell anyone where we are making money."

-Andrew. S. Fastow
Former CFO of Enron
Fortune Magazine

"A little more than a year ago, people laughed at dividends. In the future, I believe that more attention will be paid to dividends and current earnings and less to growth. There are increasing questions about the quality of earnings, by and large, companies that are paying dividends have to have earnings. They can't do that with smoke and mirrors."

-Jeremy Siegel, Finance Professor
University of Pennsylvania
Wharton School


"Out of the top 100 companies on the Nasdaq, half of them will not be around five years from now."

-John Chambers
Cisco Systems CEO

Charles Munger on the Recent stock market decline:

"What you've recently seen is just a tea party. If you, like me, lived through 1973-74 or even the early 1990s÷ There was a waiting list to get OUT of the country club -- that's when you know things are tough. If you live long enough, you'll see it."

-Charles Munger
May 2001

"Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1."

-Warren Buffett

"If Principles can become dated, they're not principles."

-Warren Buffett

(From an interview with The Vanguard Group's CEO, John J. Brennan)

How should investors evaluate their portfolio?

"It's a pretty simple scorecard: Did I make money over time and am I satisfied with the results relative to my expectations? Too many people get caught up in calculating whether they were 20 basis points ahead of this index or 40 basis points behind that index. Those are useful comparisons, but you're not investing to win a contest versus some market measure- you're trying to accumulate wealth."

-John J. Brennan
Chariman & CEO
The Vanguard Group

"The last 10 months can be viewed as a period when the market rediscovered reason. Traditional valuation tools became relevant again..."

-Byron Wien
Strategist, MSDW
Research report

Reality Check from the Wall Street Journal:

Myth No. 5: Prospects are more important than immediate earnings.

Henry Blodget of Merrill Lynch expressed the core of this myth in December, when he wrote of Internet leaders like Yahoo! Inc. "It is a mistake to be too conservative in projecting future performance. (Yahoo at that time was trading at 500 times projected profits for 2000.) The real 'risk'... is not losing money-it is missing a major upside."

-Article from WSJ
"Investors See Through 6 High-Tech Myths"

"I buy when other people are selling."

-J. Paul Getty

"What most people do is buy a fund after it has been hot for three years, just in time for it to turn cold. That is like planting a garden in October."

-Ron Muhlenkamp
Muhlenkamp Fund

"Bubbles have always given back everything. There have been no exceptions-None."

-Jeremy Grantham, Principal
Grantham, Mayo, Van Otterloo & Co. LLC

"Do you know the only thing that gives me pleasure? It's to see my dividends coming in."

-John D. Rockefeller

"Maybe I don't understand the market. Maybe the music has stopped, but people are still dancing"

-George Soros

On making unpopular suggestions during meetings of boards of directors:

"You can only belch so many times at the dinner table and get invited back."

-Warren Buffett

"It's only when the tide goes out that you learn who's been swimming naked."

-Warren Buffett

"I have seen no trend toward value investing in the 35 years I've practiced it. There seems to be some perverse human characteristic that likes to make easy things difficult."

-David Elsner

"Price is what you pay. Value is what you get."

                  -Warren Buffett, letter to partners
                  January 20, 1966

"A company with more cash than it needs more often than not uses it in such a way as to reverse the problem."

-Malcolm S. Forbes

"When the stock doubles, sell it. If it doesn't double, don't buy it."

-Will Rogers

"Whenever things go to well, I become very suspicious."

-Alan "Ace" C. Greenberg

"If I could avoid a single stock, it would be the hottest stock in the hottest industry, the one that gets the most favorable publicity, the one that every investor hears about in the car pool or on the commuter train- and succumbing to the social pressure, often buys."

-Peter Lynch

"There is a thin line between being contrarian and being just plain stubborn."

-John Neff

On the benefits that the Internet and technology are providing to society compared to the evils of stock speculation in these sectors:

"When you mix raisins and turds, you've still got turds."

-Charlie Munger
Vice Chairman
Berkshire Hathaway

"Bill spent six or seven hours explaining Microsoft to me. I am the biggest technology dummy, and he explained it pretty well. I bought 100 shares of stock. That shows two things: One is that I've got an IQ of about 50, and the second is that I didn't think he had any monopoly"

-Warren Buffett


Terms & Conditions

Copyright © 2006 Jolley Asset Management, LLC