I hope you enjoy Klarman's presentation as much as I did. It's is a bit long but worth the time.
Like Greenwald says in the beginning, the founder of Baupost Group needs no introduction. Klarman's remarks begin around the five minute mark. If you aren't familiar, he also wrote this book (link).
As usual, my notes are below. You may find Baupost Group 13F here, but it represents only a fraction of total firm AUM.
One of my least favorite trends is referring to items which have traditionally been consumption items as "investments". When I was shopping for an engagement ring for my (now) wife, the sales clerks frequently referred to diamonds as an investment. Needless to say, we had a difference of opinion.
I recently came across a May 2010 interview with Seth Klarman of the Baupost Group, value investor extraordinaire. He nicely summarized my thoughts on the matter:
“Buying anything that is a collectible, has no cash flow, and is based only on a future sale to a greater fool, if you will—even if that purchaser is not a fool—is speculating. The “investment” might work—owing to a limited supply of Monets, for example—but a commodity doesn’t have the same characteristics as a security, characteristics that allow for analysis. Other than a recent sale or appreciation due to inflation, analyzing the current or future worth of a commodity is nearly impossible.
The line I draw in the sand is that if an asset has cash flow or the likelihood of cash flow in the near term and is not purely dependent on what a future buyer might pay, then it’s an investment. If an asset’s value is totally dependent on the amount a future buyer might pay, then its purchase is speculation. The hardest commodity-like asset to categorize is land, an asset that is valuable to a future buyer because it will deliver cash flow, not because it will be sold to a future speculator.”
This blog is not investment advice. This is not a solicitation to invest. Don't take candy from strangers.
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