Paul Singer's Elliott Management Discloses Five Major Investing Lessons May 26 2017 | 8:13pm ET Paul Singer’s activist hedge fund manager Elliott Management has reportedly disclosed some of the core lessons it has learned over the years in a private letter to investors. In the letter, Elliott said that while it needed to learn some of the lessons the hard way (i.e. directly) in order to deeply incorporate them, some were "gleaned secondhand", according to aBusiness Insiderarticle that described reviewing a copy of the letter. Elliott’s five lessons: No security price is too high (or low) that it cannot go higher (or lower) Turns in markets are impossible to time Big changes in market prices frequently occur far in advance of when the reasons for the changes become apparent, and by then it is too late to incorporate the new information into one’s trading at the old prices One of the most important reasons to avoid significant losses is to avoid the painful and sometimes terminal effect of severe adversity on the quality of money managers’ decision-making processes A wide and deep education about the world, not just about capital structures, corporate business strategies and industry dynamics, is essential to the long-term success of money managers. These missives, or rather the lessons they represent, have assisted Springer’s $33 billion hedge fund in shaping the firm’s attitudes towards “trading, investing, predictability of markets, risk management and building an organization," the article continued. Elliott, which raised $5 billion in fresh capital in less than a week in early May, was founded by Singer in 1977 and has since become one of the world’s most successful investors. The firm currently manages approximately $33 billion through a number of investment vehicles active in debt, equities, commodities, currencies and various other asset classes. from FINALTERNATIVES
I found this paragraph wordy, couldn't understand it completely; "One of the most important reasons to avoid significant losses is to avoid the painful and sometimes terminal effect of severe adversity on the quality of money managers’ decision-making processes." Does it mean.... To avoid significant losses, don't argue / question the money managers' decision making process as it creates turmoil.
No, this means that when you lose lots of money, you often can't think straight and your process deteriorates. This makes business much more difficult, if not impossible, going forward.
Thanks. I'm having alot of difficulty understanding that paragraph by Elliott, not sure it is composed that well. Edit. Yes I think I got it. If the money manager loses big, it often messes with their psychology to make rational decisions in the future. (Gun shy [afraid to pull trigger]) Interesting concept.
There is a position I once bought, a couple years back, then added to it again at the top. Immediately after that the price plunged big time. The plunge was quite steep and I kept holding the position. Currently as of now, lost about 90% on that position. I'm holding and not selling now for a particular reason. I want this in my face continually as a painful reminder of what never to do again. You see, the initial problem was, I fell in love with the stock. If I sell, I get rid of the evidence, the lesson in my face haunting me every time I open the trading platform is worth more than the money I will now recoup. The longer it stays there, the more it will burn into my brain.
There you go... Your methodology is a way for you to keep the quality of your 'process' from deteriorating.
Can someone with keener insights explain how a wide and deep education is essential to investing in financial markets? Wide and deep education is rather vague. It can mean learning everything under the sun. What are some important topics to know other than capital structures, corporate business strategies and industry dynamics?
He's saying basically Machine Learn the weightings and correlations of the world. Understand the different cycles multi decade in length.
I think he me means you not only have to know the financial structures of a country you are investing in but also it's history and politics. Elliott Management had invested in Argentinian government bonds and fought them tooth and nail in US courts when Argentina tried to settle pennies on the $. http://www.valuewalk.com/2016/02/elliott-management-vs-the-republic-of-argentina/ https://www.nytimes.com/2016/04/25/...ollar-debt-dispute-with-hedge-funds.html?_r=0