In his recent interview with Howard Marks on Real Vision, Joel Greenblatt discussed the impact of interest rates on asset prices, whether this time is different, how accounting has not kept up-to-date with today’s business models, and the importance of maintaining a margin of safety. Here’s an excerpt from the interview:
What’s wonderful about having a grounding in the precepts of value investing along the lines of Benjamin Graham and Warren Buffett is that well I’ll just throw in a big margin of safety in the I don’t know category and if rates were to move up this would make it a bad investment I probably wouldn’t want to own it.
Of course it’s a world of alternatives. You have to put your money somewhere. But I would say one of your choices, as Seth Klarman and many others have said, is not only what’s in front of you today but what might be in front of you six months from now, two years from now, and you want to keep your powder dry for that.
Your list of choices is just not what’s in front of you today. It’s important to keep that in mind. If rates stay this low yeah you can pay low prices for lots of things. My assumption is they wont, and if I still want to buy it that gives me some comfort in margin of safety. I don’t know what you think of this Howard but I’d love to hear it.
You can find the entire interview here:
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