Seth Levine is a professional, institutional investor focused on selecting high yield bond positions for a financial services company. He is also the creator of The Integrating Investor where he blogs about macroeconomic and investment strategy related themes. Seth holds a Bachelor of Science degree in Mechanical Engineering from Cornell University and is a CFA charterholder. You can learn more about Seth at www.integratinginvestor.com and follow him on Twitter at @SethLevine2. Please note that any opinions and views he expresses are solely his own and do not reflect those of his current or former employers.
I recently finished reading Edwin Lefèvre’s classic Reminiscences of a Stock Operator, marking my second time through the book. I first picked it up nine years ago on the recommendation of a former coworker who was a flow trader. A burgeoning credit analyst at a bulge bracket investment bank at the time, I was interested in learning more about the trading aspect of job and had asked for a primer on the subject. While initially confused to have received the historical novel as the answer to my inquiry, my sophomoric skepticism was completely reversed by its end. Though many of the book’s lessons were largely lost upon my younger self, it struck the older, wiser, and only slightly more profitable “me” like a thunderbolt. In this post I thought I’d do some reminiscing on Lefèvre’s “Reminiscences”, and add to the ever expanding tome on the subject.
Central bankers catch a lot of flak these days. To be sure, much of it is deserved in my opinion. However, there are two dominant trends in the market place – increasing allocations towards passive and private market investment strategies – where this ire might be misplaced. What if these developments, however undesirable they may or may not be, were merely part of the “natural” evolution of investment markets?
Life imitates art far more than art imitates life.
Despite the opulent or debauched images one might have about the investment industry (depending on one’s perspective), the fact is that investing is a highly intellectual pursuit. I don’t mean this in the colloquial sense where one ruminates on meaningless abstract ideas purely for contemplation’s sake. Rather, it is an immensely cognitive and productive activity. Successful investing doesn’t require exceptional physical conditioning, brawn, salesmanship, “people skills”, mathematical aptitude, or a high IQ. It entails (I think) developing some kind of mental model for how the world works. Not only must this model display some degree of accuracy (i.e. be a good one), but one must maintain conviction in his/her model and have the integrity to stick to it through thick and thin. Said differently, one needs a well-defined investment philosophy.
It’s no secret that emerging markets (EM) are in a bit of a rough patch. While the unfortunate events in Turkey garnered most of the attention initially, nearly anything related to EM has slid in value. What exactly is going on here? Is this just another acute crisis making its way through the lesser developed regions of the world again? Or have other signals emerged to suggest there to be a larger issue at play? Given the is-ought approach we take on this site, it’s worth digging into some more. After all, a better grasp of what this market driver is—if anything—should better inform us for how we ought to position our portfolios.
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