Seth Klarman’s Wisdom

By on October 8, 2009

Dah Hui Lau, has written an article featured at about the “thinkings and principles” of Seth Klarman of The Baupost Group. Klarman has been compared to Warren Buffett and has been able to generate extremely good returns over the past two decades.

Regarding market efficiency, Klarman has written in his investor letter:

“Markets are inefficient because of human nature – innate, deep-rooted, permanent. People don’t consciously choose to invest with emotion – they simply can’t help it.

“So if the entire country became securities analysts, memorized Benjamin Graham’s Intelligent Investor and regularly attended Warren Buffett’s shareholder meetings, most people would, nevertheless, find themselves irresistibly drawn to hot initial public offerings, momentum strategies and investment fads…People would, in short, still be attracted to short-term, get rich quick schemes.”

“In short, we believe market efficiency is a fine academic theory that is unlikely ever to bear meaningful resemblance to the real world of investing.”

The source below includes many other writings by Klarman:

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