Standing on the Shoulders of Giants

It was Sir Isaac Newton who famously said “If I have seen further than certain other men it is by standing upon the shoulders of giants.” Learning from those who came before us in life have left huge treasure trove of knowledge that we cause to our benefit but it seems few of us ever take the time to study what those great minds before have already learned. Nowhere is this truer than in the markets it would seem. This seems to be particularly true when it comes to investing in the financial markets. There have been some wildly successful investors who have been embarrassingly generous about sharing their secrets of making money in the markets but almost no one takes the time to read the body of work. Most people know who some of these legends are but have never read the material. Most investors have heard of Ben graham but very few have ever read the Intelligent Investor and even fewer have ever cracked the cover of Security Analysis. Everybody knows who Warren Buffet is but not that many have taken the time to read his annual reports covering 50 years or so in his partnership and Berkshire Hathaway. Those who would be great traders all know who Jesse Livermore was but not too many realize their hero died a suicide and broke from the last in his string of massive loosed during his lifetime. Investors would be well served to read the works of the great investors who came before them instead of just learning the superficial legends about some of the great characters of Wall Street history. The story of George Soros breaking the pound or how Tony Saliba made a fortune trading seats during the crash of 1987 is fun but it is not going to help you make a lot of money over your investing lifetime. Everyone knows Warren Buffett and can offer up a quote or two from him but it is the co-chair of Berkshire Hathaway (BRK) Charlie Munger who has offered up some of the best investing advice. He once said that “"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying: 'It's the strong swimmers who drown.” While everyone else is trying to figure out the new and fancy way to beat the market Mr. Munger focuses on not trying to find the latest “edge” but avoiding the wealth destroying mistake. There are several books about Mr. Munger and he has a treasure trove of annual reports form his chairmanship of WESCO Financial and the Daily Journal (DJCO) that should be must reading for investors who hope to earn high long term returns. Seth Klarman of Baupost is another legendary investor who the majority of investors have never heard of and even fewer have read his writings. Although his classic margin of Safety is out of print copies can occasionally be found around the internet as can copies of past letters to shareholders that outline his investing philosophy. While everyone less worries about beating the market and finding the opposite Mr. Klarman tells us that exactly the opposite is more profitable saying “"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." His books, interviews and shareholder letters are also must reads for investors who really want to make money in the stock market. Charlie Munger gave us the best advice on how to stand on the shoulders of the giants of the investing world. He tells us “If it is wisdom you're after, you're going to spend a lot of time on your ass reading. In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time.” There is an incredible wealth of knowledge out there form investors who have earned enormous success including Graham, Buffet, Munger, Klarman, Marty Whitman , James Montier and others that will help you become a much better investor. The knowledge is there. It is up to you to do the legwork and read the information that has so generously been made available to you.
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