I couldn't help thinking about NN as I read this part of a story in Barron's today...
...
Was Buffett not concerned about risk? Of course he was, but not those risks that were most pertinent to the shorter-term-oriented, more rigidly constrained investors who were unwittingly making him wealthier every time they sold him another share. Those investors, quite like today's big mutual-fund complexes, were disproportionately worried about their short-term investment results and their clients' perception of same. In such a world, relative underperformance is a disaster and the longer term is measured by the frequency with which investment results are evaluated. Risk for them is not being stupid but looking stupid. Risk is not overpaying, but failing to overpay for something everyone else holds. Risk is more about standing apart from the crowd than about getting clobbered, as long as you have a lot of company.
History Doesn't Quite Repeat
History never repeats itself exactly. So in 1998 investors urgently seeking liquidity are selling not Washington Post but small-cap and emerging-market equities. Investors tired of underperforming don't sell Dell Computer (no one, it seems, sells Dell), which they love for what it has done for them no matter how expensive it has become. It is so much easier for them to sell whatever has recently disappointed investor expectations, no matter how inexpensive it has become. Mutual-fund managers, desperate to put cash to work, don't buy what is cheap but what is working, since what is cheap by definition hasn't been working.
...
Whole story at: (for WSJ subscribers)
interactive.wsj.com |
