“Son, we live in a world where markets have been distorted by vast amounts of QE, and that QE has to be fought by traders with guts. Who's gonna do it? You? You, ETF manager? I have a greater responsibility than you could possibly fathom. You weep for free markets and you curse the Bernanke, Kuroda and Draghi.
“You have that luxury. You have the luxury of not knowing what I know; that QE's death, while tragic for some, probably saved markets. And my existence, while grotesque and incomprehensible to you, saves markets. You don't want the truth because deep down in places you don't talk about at parties, you want me in those markets . You need me in those markets. We use words like honour, risk, stop-loss.
“We use these words as the backbone of a life spent defending something. You use them as a punchline. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very market freedom that I provide, and then questions the manner in which I provide it! I would rather you just said "thank you" and went on your way, Otherwise, I suggest you pick up a book and start trading at a post. Either way, I don't give a damn what you think you are entitled to!”
- Patrick Perret-Green of AdMacro, with apologies to Colonel Nathan R. Jessup, Commanding Officer, Marine Ground Forces, Guantanamo Bay, Cuba.
Challenged to distil the secret of investing into just three words, Benjamin Graham offered the phrase MARGIN OF SAFETY. The adjectives ‘value’ and ‘growth’ are routinely butchered, manipulated, stretched and abused by fund managers, but the defining difference between the two is that ‘value’ stocks possess a margin of safety, and ‘growth’ stocks invariably don’t. When a genuine ‘value’ stock – listed shares of a high quality company with disciplined, shareholder-friendly management and generating high and sustainable levels of cash – gets cheaper, the logical response is to buy more. When a ‘growth’ stocks gets cheaper, it may simply mean that the tide is going out. Dollar cost averaging into ‘value’ stocks makes sense for those with the liquidity to do it. Dollar cost averaging into ‘growth’ stocks can be straightforwardly dangerous. Example: Alliance Capital and its fund manager Alfred Harrison, acting on behalf of the Florida state pension fund, elected to dollar cost average shares of Enron stock as they fell during the second half of 2001. The Florida state pension fund ended up losing $328 million.
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