Securities in an Insecure World...Graham

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friar1610
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Securities in an Insecure World...Graham

Post by friar1610 » Fri Aug 11, 2017 5:08 pm

A friend sent me a link to a recent Barron's article by Jeremy Grantham called "Why are Stock Market Prices So High?" It was one of those articles I had to plod through although I found his points interesting. Toward the end Grantham quotes a November 1963 speech by Benjamin Graham called "Securities in an Insecure World." I found this quote from that speech to be a "keeper" and as relevant today as it was in '63:

“The main need here is for the investor to select some rule which seems to be suitable for his point of view, one which will keep him out of mischief, and one, I insist, which will always maintain some interest in common stocks regardless of how high the market level goes. For if you had followed one of these older formulas which took you out of common stocks entirely at some level of the market, your disappointment would have been so great because of the ensuing advance as probably to ruin you from the standpoint of intelligent investing for the rest of your life.”

This is the link to the entire Grantham article:

http://www.barrons.com/articles/grantha ... syOevLx%2B
Friar1610

selftalk
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Re: Securities in an Insecure World...Graham

Post by selftalk » Fri Aug 11, 2017 5:34 pm

Buy and hold no matter what.

jebmke
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Re: Securities in an Insecure World...Graham

Post by jebmke » Fri Aug 11, 2017 5:39 pm

The world has been insecure since the big bang.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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CyberBob
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Re: Securities in an Insecure World...Graham

Post by CyberBob » Fri Aug 11, 2017 6:34 pm

For anyone interested, here's Graham's entire 1963 speech Securities in an Insecure World.

TheNightsToCome
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Re: Securities in an Insecure World...Graham

Post by TheNightsToCome » Fri Aug 11, 2017 8:28 pm

selftalk wrote:Buy and hold no matter what.
That hasn't worked so well since 1989 in Japan.

Dandy
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Re: Securities in an Insecure World...Graham

Post by Dandy » Sun Aug 13, 2017 7:33 am

There is a quest for simplicity that is understandable but sometimes overdone. In the risky and often scary world of equity investing we look to some allocation, formula or guiding words to put us at ease and make the path of managing our investments easier. Some investing commandments to keep us away from sin and show us the light. Stay the course is one guiding light. When things are scary and the assets are plunging - people can cling on to that phrase like the mast of a ship in a hurricane. It can compartmentalize our fear and let us move on. And it is usually a good idea to boot.

Controlling fear and the resulting rash moves is a worthy goal. But, as captain of your investment ship you need to understand you are responsible for your investment fate not the investment guru's who have offered valuable guidelines/principals. Stay the course might be a great guide in most investment situations but you need to decide when that may not apply or fully apply to your specific situation. Heresy, not really -- while Mr. Bogle is a firm believer in staying the course - he does recommend that when the market is extremely overvalued, as it was in 2000, you should probably consider significant reductions in your equity allocations, as he did. In or near retirement with the loss of human capital and prospect on withdrawals not contributions might also alter your approach to your allocation or how, how much or when/if you rebalance. If you have reached or exceeded your "number" that may also be a time ripe for course alteration. So, stay the course is not an absolute but a valuable default mode of operation for most of us most of the time.

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htdrag11
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Re: Securities in an Insecure World...Graham

Post by htdrag11 » Sun Aug 13, 2017 9:06 am

TheNightsToCome wrote:
Fri Aug 11, 2017 8:28 pm
selftalk wrote:Buy and hold no matter what.
That hasn't worked so well since 1989 in Japan.
+1. We do need to look at our IPS annually and reassess our goals.

dharrythomas
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Re: Securities in an Insecure World...Graham

Post by dharrythomas » Sun Aug 13, 2017 1:23 pm

Graham's default asset allocation was 50/50 and he said that regardless of market conditions everyone should be between 75/25 and 25/75. So never exit the market and never be without a cushion in bonds.

Good luck!

Harry

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willthrill81
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Re: Securities in an Insecure World...Graham

Post by willthrill81 » Sun Aug 13, 2017 1:26 pm

TheNightsToCome wrote:
Fri Aug 11, 2017 8:28 pm
selftalk wrote:Buy and hold no matter what.
That hasn't worked so well since 1989 in Japan.
True, but it worked out better than German bonds issued in 1922.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Securities in an Insecure World...Graham

Post by Valuethinker » Sun Aug 13, 2017 3:46 pm

willthrill81 wrote:
Sun Aug 13, 2017 1:26 pm
TheNightsToCome wrote:
Fri Aug 11, 2017 8:28 pm
selftalk wrote:Buy and hold no matter what.
That hasn't worked so well since 1989 in Japan.
True, but it worked out better than German bonds issued in 1922.
The two situations are so different as to be basically an irrelevant comparison.

German government bonds we're not overvalued In 1922 conversely The New democracy was on The point of collapse from both right and left wing uprisings. And France was going to invade The Rhineland The next year when war reparations went unpaid.

Japan In 1989 was The highest stock market and Property valuations ever recorded at The end of 40 years of economic success which had seen a war devastated country become The world's second largest economy and Japanese companies become super multinationals.

The only common thread is The need for diversification.

Valuethinker
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Re: Securities in an Insecure World...Graham

Post by Valuethinker » Sun Aug 13, 2017 3:48 pm

dharrythomas wrote:
Sun Aug 13, 2017 1:23 pm
Graham's default asset allocation was 50/50 and he said that regardless of market conditions everyone should be between 75/25 and 25/75. So never exit the market and never be without a cushion in bonds.

Good luck!

Harry
Still Very sound advice.

Alas stocks are as expensive as 1929 and bonds yield Less than they did during The Great Depression. (Stocks nearly as expensive).

Not bullish for future returns.

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willthrill81
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Re: Securities in an Insecure World...Graham

Post by willthrill81 » Sun Aug 13, 2017 5:28 pm

Valuethinker wrote:
Sun Aug 13, 2017 3:46 pm
willthrill81 wrote:
Sun Aug 13, 2017 1:26 pm
TheNightsToCome wrote:
Fri Aug 11, 2017 8:28 pm
selftalk wrote:Buy and hold no matter what.
That hasn't worked so well since 1989 in Japan.
True, but it worked out better than German bonds issued in 1922.
The two situations are so different as to be basically an irrelevant comparison.

German government bonds we're not overvalued In 1922 conversely The New democracy was on The point of collapse from both right and left wing uprisings. And France was going to invade The Rhineland The next year when war reparations went unpaid.

Japan In 1989 was The highest stock market and Property valuations ever recorded at The end of 40 years of economic success which had seen a war devastated country become The world's second largest economy and Japanese companies become super multinationals.

The only common thread is The need for diversification.
I view the common threads as being "nothing is guaranteed" and "no one knows the future." All roads carry risk.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

TheNightsToCome
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Re: Securities in an Insecure World...Graham

Post by TheNightsToCome » Sun Aug 13, 2017 5:34 pm

willthrill81 wrote:
Sun Aug 13, 2017 5:28 pm
Valuethinker wrote:
Sun Aug 13, 2017 3:46 pm
willthrill81 wrote:
Sun Aug 13, 2017 1:26 pm
TheNightsToCome wrote:
Fri Aug 11, 2017 8:28 pm
selftalk wrote:Buy and hold no matter what.
That hasn't worked so well since 1989 in Japan.
True, but it worked out better than German bonds issued in 1922.
The two situations are so different as to be basically an irrelevant comparison.

German government bonds we're not overvalued In 1922 conversely The New democracy was on The point of collapse from both right and left wing uprisings. And France was going to invade The Rhineland The next year when war reparations went unpaid.

Japan In 1989 was The highest stock market and Property valuations ever recorded at The end of 40 years of economic success which had seen a war devastated country become The world's second largest economy and Japanese companies become super multinationals.

The only common thread is The need for diversification.
I view the common threads as being "nothing is guaranteed" and "no one knows the future." All roads carry risk.
"Alas stocks are as expensive as 1929 and bonds yield Less than they did during The Great Depression. (Stocks nearly as expensive).

Not bullish for future returns."

All roads carry risk, but not equal risk. Current valuations almost guarantee low returns, and they increase the risk of large losses.

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