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Roula Khalaf, the FT editor, chooses her favorite stories in this weekly newsletter.
The writer is a philanthropist, private investor and co -founder of Pimco
With age some knowledge comes and as we go in 2025, now it is such a good time as everyone to see some of my investment careers that have served me well.
On the occasion of the last year of publishing a (almost) comprehensive collection of my Outlook investment essays returning in the late 1970s, I allowed myself some time for reflection. Not over the humility of the calls I received right or wrong, but what can be withdrawn from them now.
In great appearance, American capitalism is in terms of relatively more remembers the wild West than some economies. It allows the risk taking – of course in many ways by the government and the Central Bank policies, but flexible enough to promote the modern entrepreneur in seeking a profit. This promotion predicts, even encourages, risk and innovation. And in most cases, it also allows not only success but complete failure and bankruptcy. This lesson, I believe, that an investor must know and learn as we finish our way to the long -term mountain of portfolio management in this “new era”.
The combination of lever and time is a critic for getting to know every portfolio plan. Lever can be dangerous, but it is less given enough time for essential ideas of sound investment to work. Just ask Warren Buffett. His confidence in the return of superior capital for the long run has been anchored by the balance sheets of Berkshire Hathaway insurance companies. The capital from those companies has been more or less unbearable to “call” in inopportune times. Security premiums and long -term debt have half permanent to them that overnight lending and the capital of subscribers does not. And so, Buffett who should be known for his brilliance as a financial architect, as well as an investor-has advanced while John MeriWeher of long-term capital management fame was temporarily prevented in the face of collateral calls in the company’s trading positions. Buffett has shown that time is a third life dimension in financial architecture.
And over time, I have learned another valuable lesson, and that is that all money managers and of course bond managers have a responsibility that exceeds the accumulation of assets, winning tariffs and overcoming competition. They give money for companies, places and continents, and what they do affect the fate and life of hundreds of millions if not billions of people. When irrationality or greed gets the upper hand – as they did in the US savings and loan crisis in the late 1980s or maybe with the dotcom bubble and now Bitcoin bubble – then markets, economies and humans can be damaged for years and years.
It also helps to know what the minds of other investors have because markets, as John Maynard Keynes noticed long ago, can be a beauty contest – at least in the short term. The moment is actually a proven historical generator of “Alfa” over market returns. But when the production wave of the moment collapses, the consequences are usually immediate and prices the opposite course. I learned this early in my career from an incident that includes my first and only personalized license plate.
I had initially bought a license plate by reading “Bonds 1” in an attempt to send a message to the chair of my then -peaceful mutual employer, whom I felt controlling the fate of my next rise and at least a few after that. If I could drive that car next to it in the company garage, I can quickly or at least finally send a subliminal signal that yours really was a pretty hot ticket to the Bond world – an idea, by the way, which had no basis in the fact in 1973. Well, the comment of the “excellent license plate” never descended from the chair and did not do much in the way of rising, but “Bonds 1” attracted the attention of some observers.
Several times during the filling of my gas reservoir on mission Viejo that year, an interested passenger climbed to me and asked me if I could escape from their nephew or brother from the orange prison. It was then that I learned that “bonds 1” would say different things to different people. It was a reminder that investors also have much different to get assets that may be contrary to mine. Experience has shown again and again that he pays me to hear such images and that the people who look at is essential for the financial markets. So, as it turns out, one of my most important lessons in searching for markets came from a reflection at a predetermined gas station.
