YouSaid · the spoken record

Seth Klarman

lines on the record: 115
first: 2023-07-17
most recent: 2023-07-17
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“The academic idea was logical that there are transaction costs and there are a lot of competitors. And even when there aren't that many, even one competitor can reprice and mispricing. But had they chosen instead to sit down at the trading desk of mutual shares, they might have seen what really inefficient markets looks like and realized that what's true in theory isn't true in practice in every case. The first book that I read about the efficient market was Maukill, and it was about the random walk on Wall Street. I appreciated what he was trying to say, but I also knew that was just silliness. And what's interesting is it was true in the same way that they mused in that book you could try to imagine what it would be like to ride a horse by sitting on the fence and observing a bunch of horses in the field, or you can go get on a horse.”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“I read a book after that but quite a while ago called To Conquer the Air and it's about Orville and Wilbur Wright and their building a flying machine in the early nineteen hundreds at the same time as they were trying to build an airplane you had a guy named Langley at Smithsonian also trying to build a flying machine and he was the respected guy he was an academic famous and everybody thought he would succeed and it all made sense in theory but the Wright brothers went down to Kitty Hawk where the winds were strong and where they could experiment with what the winds might do to any particular kind of flying craft and how the wings of an airplane might be the same.”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“Swiss, you're learning early on in your career, it's also around the same time you had the Bill Sharps of the world writing about efficient markets hypothesis. And I'm really curious as you started hearing about that, thinking about the markets and index fund investing. And then on the other side, you're seeing all these security level inefficiencies. How did you think about the investing world more broadly?”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“Complexity leads sometimes to opportunity that you need to really soak yourself in the details that opportunity may not immediately be apparent. It certainly wouldn't be apparent from reading a financial report from last year because that's not an ongoing concern, but rather understanding how the pieces all come together using your own ideational thinking to understand what might get in the way. Is there an approval needed or are some payments owed to somebody that you've got to subtract before you think about your proceeds or are there taxes due on the transaction? It was really a broadening example of the kind of things an arbitrage investor needs to think about compared to an investor in a going concern.”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“That was math I could do in my head and math that made the nature of that inefficiency seem so glaring and so obvious and probably was a great example for me of complexity can be an investor's friend, that if a person wanted to buy electro rent previously, they couldn't. The only way to get it was this way that most of the time you wouldn't want to pay $8 in change to create a share of something that is only worth cents in that most of the money you were just going to get back from the liquidation payment end of the licensing deal with Telecorps. Nevertheless, it was a great lesson that there are arbitrage opportunities.”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“I also remember the first stock, I believe Michael Price threw a prospectus on my desk and said, here, figure this out, which was a typical Michael Price instruction to me. A company called Telecorps, which was an electronics distributor, was losing their contract with the Japanese company whose products they were distributing. And they were going to get bought out for the value of networking capital or something like that. Telecorpor also owned a subsidiary called Electrorent, which rented and leased the same kind of electronic equipment. So you were going to get $8 or so in cash over a period of time, but not that long. And you were going to receive share of Electro rent or fraction of a share of Electro rent. And ElectroRent at that valuation that you could create for was trading at under one time's earnings.”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“trader Hans Jacobson, you hear all these names that they're bidding various prices, and you really have no idea what lies behind that, but eventually it became clear that a number of them were US railroad bankruptcies, several connected to the Penn Central bankruptcy, which was unfolding around that time, and which led to the creation of a bunch of other securities. It turns out, of course, that railroads had been granted, building rights over the tracks, that they had all kinds of real estate value in addition to any value they might have as a railroad. And so there were just a series of securities that went from obscurity because you'd never even heard of them into mainstream, at least for somebody sitting at mutual shares, because they started to make sense and you understood why the prices fluctuated and why they might be really attractive as an investor.”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“The most clear thing was that picking stocks yourself, you knew what the companies did. I knew that Johnson& Johnson made bandages, which I apparently was an extensive user of when I was a small kid. But I didn't really know how to connect that to anything tangible about why would I pay a particular price or what would make that stock go up or down. So being in the business and watching every day and seeing some of the peripheral things. Like you can't just assume that just because the stock trades at a price or a bond trades at a price, that you can actually buy any there because it's a market. And maybe you can buy it and maybe it's not that liquid or maybe by the time you get around to deciding what you want to buy, it's moved a lot. So there was just a lot of nuts and bolts. that all went into the entire equation. Mutual shares was a great place to sit because Max Heine had in his office this old railroad bond.”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“Trade at a discount from what they're pretty obviously worse, it's easy to get excited that there's some inefficiency here and you have a chance to really add value and do well”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I was really fortunate. My uncle Paul, my mother's brother, lived in New York, and he was a tax attorney and an old friend of Max Heina, who was the founder head of mutual shares. My uncle introduced me to Max when I was junior in college and I got a job for the summer and then ultimately an offer to come back full time when I graduated, which was in January of 79. So that's how I got to mutual shares and my history there. I continued to hold stocks, trade stocks, and read. But the key was getting that job. It was a value investing mutual fund. Mike Price had started by then and was Max's protege and running a lot of the activities day to day. It was like being let in on a secret that you could read about it all you want, but when you actually start doing analysis and you see individual companies”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“I bought a share of Johnson and Johnson when I was around 10 years old with money I got from my birthday a few days later it split three for one which I didn't know had been announced but it must have been announced a little bit before that so I own three shares of Johnson& Johnson why'd I buy it? I knew what the company did and you got to start somewhere My mom found me a very kind stockbroker named Max Silverman down in Baltimore and he was happy to execute an order where he couldn't possibly make any money and he was my stockbroker for a number of years but it was always at a very small scale.”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“My main interest was in the stock market. I was a numbers guy. I loved the baseball statistics. I was always turning the Baltimore sunpapers to the sports section. They would have every batter and every pitcher in the American League and all their stats. And I was learning how to calculate those statistics as well. And at some point, I noticed there were a whole bunch of numbers, a few pages after the baseball statistics. I asked my dad what those were and found out those were the stock exchange listings. And so it just began another journey of trying to connect my interest to figure out what was going on and what was that all about. I read a bunch about the market. I remember reading”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“It goes way back to childhood, maybe even early childhood. I was always starting small businesses. I was a micro entrepreneur in the sense of doing leaf raking and lawn mowing. I had a snow cone stand and got in trouble with the Baltimore health authorities when we added hot dogs to that snow cone stand because we didn't have a license. And I was having little carnivals in our yard for kids and built a mini golf course in my yard, although my mom didn't really appreciate that had a tiny interest in collecting coins and used to buy and sell some coins by mail, a mini activity as well. So I was just doing a lot. Mostly just getting my feet wet and learning a lot”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“Perspectives on the book's security analysis and margin of safety. We close discussing Seth's personal investments in the Boston Red Sox, horse racing, and philanthropy. Seth generally stays away from the public eye, so I was particularly grateful to share this conversation some twenty five years after we first met.”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess on today's show is Seth Carman, legendary value investor and president of the Baupost Group, an investment firm founded in 1982 that manages $27 billion. Seth authored the Very Out of Print Margin of Safety and edited the recently released seventh edition of Gram and Dodd's Value Investing Classic Security Analysis. Our conversation covers Seth's early experience in business and investing, Path to Baupost, Timeless Value Investing Principles, and those that have changed over time. We discuss Vaupost's application of value investing across sourcing, diligence, portfolio construction, and risk management. We then turned assess thoughts on illiquidity, international investing, the weird current environment, positioning portfolios for it, alignment with clients, succession at Baupost, and is updated”
2023-07-17 · Capital Allocators · Seth Klarman – Timeless Value Investing (EP.328) · IDENTIFIED FROM THE TRANSCRIPT · source