Six Rules of Michael Steinhardt

Six Rules of Michael Steinhardt

Posted By Barry Ritholtz On September 26, 2010 @ 8:30 am In Apprenticed Investor,Investing |

Michael Steinhardt was one of the most successful hedge fund managers of all time. A dollar invested with Steinhardt Partners LP in 1967 was worth $481 when Steinhardt retired in 1995.

The following six rules were pulled out from a speech he gave:

1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.

2. Always make your living doing something you enjoy: Devote your full intensity for success over the long-term.

3. Be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.

4. Make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.

5. Always trust your intuition: Intuition is more than just a hunch — it resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided.

6. Don’t make small investments: You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.

~~~

Conversation with Charles Munger September 2010

1. Never feel sorry for your self, even if your child has cancer.
2. Never have envy - it's the only sin without any fun.
3. Never regret about your past mistakes and their consequences on your life. Attitude towards past mistakes: study them hard so that you don't repeat them in the future.
4. Part of enjoying life is about recognize and accept reality as it is.

++ Nietzsche: “The most fundamental form of human stupidity is forgetting what we were trying to do in the first place.”

4. Macro economy: ignore it! Why worry about things you have no control about? Just keep your head down and work harder to get the best out of the situation.

Why tech companies hold so much cash and why it's naive to use EV = MC - cash for valuation

Source:

http://seekingalpha.com/article/224772-why-are-technology-ceos-so-reluctant-to-pay-dividends
http://seekingalpha.com/article/224992-microsoft-s-debt-sale-plans

Reason-1: Incentive. When managements hold large amount of options, they are inclined to not paying dividend but reserving cash to do buyback to hold stock price.
Reason-2: Wanting to do foolish acquisition.
Reason-3: Many US companies' cash are held oversea, so bringing them back involves transfer tax (hence MSFT's debt issuing plan, and you an really not do IV = MC - cash)

So you as a minority shareholders don't really 'own' those cashes on balance sheet! They are likely to be used for:

a) foolish acquisition (e.g. HP's recent acquisition);
b) stock buyback to offset option dilution (wealth transfer to management)

马云 quotes

http://baike.baidu.com/view/16360.html#1
＊看见10只兔子，你到底抓哪一只？有些人一会儿抓这个兔子，一会儿抓那个兔子，最后可能一只也抓不住。CEO的主要任务不是寻找机会而是对机会说NO。机会太多，只能抓一个。我只能抓一只兔子，抓多了，什么都会丢掉。
*永远告诉自己一句话：从创业得第一天起，你每天要面对的是困难和失败，而不是成功。我最困难的时候还没有到，但有一天一定会到。
＊我永远相信只要永不放弃，我们还是有机会的。有时候死扛下去总是会有机会的.
＊今天很残酷，明天更残酷，后天会很美好，但绝大多数人都死在明天晚上。
＊天不怕，地不怕，就怕CFO当CEO。
＊永远要相信边上的人比你聪明。
＊上当不是别人太狡猾，而是自己太贪，是因为自己才会上当。
＊其实很多人的问题是因为他们回答的全是对的。
＊一个一流的创意，三流的执行，我宁可喜欢一个一流的执行，三流的创意。
＊最优秀的模式往往是最简单的东西。
＊创业者书读得不多没关系，就怕不在社会上读书。
＊这个世界不是因为你能做什么，而是你该做什么。
＊关系特别不可靠，做生意不能凭关系，做生意也不能凭小聪明。
＊一个好的东西往往是说不清楚的，说得清楚的往往不是好东西。
＊做战略最忌讳的是面面俱到，一定要记住重点突破，所有的资源在一点突破，才有可能赢。
＊聪明是智慧者的天敌，傻瓜用嘴讲话，聪明的人用脑袋讲话，智慧的人用心讲话。
＊永远要把对手想得非常强大，哪怕非常弱小，你也要把他想得非常强大。

The smart person accepts. the idiot insists

Source http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?currentPage=all

But I also wondered how a bunch of odd-looking guys who had walked away from the material world had such a knack for getting their way in it: how on earth do monks, of all people, wind up as Greece’s best shot at a Harvard Business School case study?

After about two hours I work up the nerve to ask him. To my surprise he takes me seriously. He points to a sign he has tacked up on one of his cabinets, and translates it from the Greek: the smart person accepts. the idiot insists.

He got it, he says, on one of his business trips to the Ministry of Tourism. “This is the secret of success for anywhere in the world, not just the monastery,” he says, and then goes on to describe pretty much word for word the first rule of improvisational comedy, or for that matter any successful collaborative enterprise. Take whatever is thrown at you and build upon it. “Yes … and” rather than “No … but.” “The idiot is bound by his pride,” he says. “It always has to be his way. This is also true of the person who is deceptive or doing things wrong: he always tries to justify himself. A person who is bright in regard to his spiritual life is humble. He accepts what others tell him—criticism, ideas—and he works with them.”