• With Barron’s recently proclaiming “Next Stop, Dow 30,000,” it may be time to start thinking about downside protection.
  • As value-oriented investors, we like to think that we always consider the downside. However, no one is immune to complacency as successes pile up and our investment theses play out as expected. We start attributing success more and more to our own intelligence rather than the benign market environment.
  • Howard Marks suggested in an interview with The Manual of Ideas that investors be aware of the “temperature of the market” – not as a way of replacing or diluting their bottom-up approach, but rather as a way of modulating the aggressiveness with which they pursue returns. As investors become almost uniformely optimistic and markets seemingly have only one way to go (“Next Stop, Dow 30,000”), it may be time to focus less on return on capital and more on return of capital.

* Source: http://latticework.com/now-available-best-ideas-2017-issue-of-the-manual-of-ideas/


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