What is risky?
Few simplistic tweets: risk means different things to different investors.
A widely overused and subjective term: something can be risky to group A, but not to group B.
Perception of risk (foresight) vs realized risk (hindsight). These are not the same thing.
Few simplistic tweets: risk means different things to different investors.
A widely overused and subjective term: something can be risky to group A, but not to group B.
Perception of risk (foresight) vs realized risk (hindsight). These are not the same thing.
Institutions look at risk as volatility. We don't.
And Wall Street throws uncertainty with risk into the same bucket. Once again, we don't.
When an American, Brit, or Aussie tells us Emerging Markets are very risky, we partly agree but partly smile at the Home Country bias.
And Wall Street throws uncertainty with risk into the same bucket. Once again, we don't.
When an American, Brit, or Aussie tells us Emerging Markets are very risky, we partly agree but partly smile at the Home Country bias.
We believe when something has fallen in price due to uncertainty — but not due to quality and its fundamental prospects in the future — there is an opportunity at hand.
"We want to buy them when they're on the operating table," said Warren Buffett famously.
"We want to buy them when they're on the operating table," said Warren Buffett famously.
It is far easier to spot when something is fragile than risky.
Fragile investments can look good for a very long time (for years) and yet the underlying risk is still embedded in the transaction.
This is very similar to The Turkey Problem (the problem of inductive thinking).
Fragile investments can look good for a very long time (for years) and yet the underlying risk is still embedded in the transaction.
This is very similar to The Turkey Problem (the problem of inductive thinking).
Risk happens:
• overcrowded trades (overconfidence effect)
• buying frenzy (social proof)
• nosebleed valuations (chauffeur knowledge)
• extrapolating the past (confirmation bias)
• rigidity & inflexibility (path dependence)
• financial, political & legal decay (entropy)
• overcrowded trades (overconfidence effect)
• buying frenzy (social proof)
• nosebleed valuations (chauffeur knowledge)
• extrapolating the past (confirmation bias)
• rigidity & inflexibility (path dependence)
• financial, political & legal decay (entropy)
• • •
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