20 Lessons to Learn from the Last Week --by Douglas Kass

 
20 Lessons to Learn from the Last Week

Originally published Aug. 24 at 7:35 p.m. EDT  

• The world -- socially, economically and in terms of our capital markets -- is flat, interconnected and networked.

• You pull your own trading and investment levers. Make independent, thoughtful decisions and judgments in part from accumulated input from analysts and financial advisers that you respect, are rigorous in analysis and utilize common sense.

• The investment mosaic is complex. Attempts to simplify it into sound bytes based on over reliance on price action, dependency on monetary policy, etc., can be hazardous to your investment health.

• Ignore those perpetually bullish market commentators who talk fast and are self confident, as many are three miles wide but only an inch deep in market and company knowledge. Many of them are blind to the reality of headwinds and changing structural developments.

• Ignore those perpetually bearish market commentators who talk fast, are self confident, offer a Cassandra-like view and see all market breaks as the beginning of the end of the world. Many of them ignore favorable conditions and advancements -- and, they, too, are maybe three miles wide but only an inch deep in market knowledge.

• In other words, take the middle road, not the extreme and dangerous one.

• Wall Street is inhabited by many who've made one great call in a row.

• The remnants sometime outsmart the crowd -- especially at important inflection points.

• Always consider the downside and weigh the negative factors, even when others ignore them during a market upswing.

• It often pays to anticipate rather than react, as risk can happen fast.

• Always evaluate risk vs. reward, as it's the centerpiece and foundation of successful investing. ("Price is what you pay, value is what you get," as Warren Buffett puts it.)

• "T.I.N.A." ("there is no alternative") is B.S. -- and a non-rigorous reason to be in equities.

• Cash has a purpose and can provide protection in perilous or overvalued times.

• Wait for the right pitch. Keeping the bat on your shoulder and not making investment swings can often make a lot of sense.

• Always ignore leverage. Invest with your head, not over it.

• Know your timeframe.

• Know your risk appetite and profile and don't be tempted to stray from it.

• Keep your emotions in check.

• History rhymes. To better understand it, read as much as possible -- particularly from those legendary investors who delivered excess investment returns in the past.

• Finally, "be fearful when others are greedy and greedy when others are fearful." (Another famous Warren Buffett line.)