- Investment performance has to be assessed through a complete economic cycle in order to reach the highest possible long term value.
- In this century, stocks have performed poorly from peak economic cycle to peak economic cycle.
- Analyzing fundamental risk against the recent performance of the S&P 500 shows us that those who are long the S&P are practically accepting long term negative returns for momentum created short term positive returns.
Recently, we analyzed Seth Klarman’s amazing performance and investing rationale. There were some pretty difficult things to digest, like the fact that he underperformed the S&P 500 by 50% in the late 1990s.
But this leads us to some very interesting questions: Do we properly measure investment success? Is the investment manager that invested in internet stocks in the period from 1996 to 1999 a good manager? Similarly, is the manager that created wonderful returns in the last 7 years by being long U.S. stocks a good manager? More →