[ SHORT-TERMISM ]
“ There is a great deal of time where there ’ s not a lot of point taking risk and then there are specific moments in time where there are huge opportunities ”
as those work well when you ’ re in a recovery , while the areas that don ’ t are the quality growth names that peaked in September and have underperformed ever since . I wouldn ’ t be surprised if that carries on .”
Lining their pockets There have been many examples through history of investors who have made enormous sums of money in a relatively short period of time . Charlie Parker , managing director at Albemarle Street Partners , says this is not because they have used a shortterm strategy , but because they have approached risk and opportunity in a non-traditional manner .
$ 3.7bn
– profit Berkshire Hathaway made from 2008 to 2011 on a $ 5bn loan to Goldman Sachs
“ The people who have all the world ’ s money in their hands , like Warren Buffett , Apple and sovereign wealth funds , are in a position where they don ’ t take risk in a linear way ,” he explains . “ Rather , they recognise that there is a great deal of time where there ’ s not a lot of point taking risk and then there are specific moments in time where there are huge opportunities .” One example came in the 2008 financial crisis when Buffett loaned Goldman Sachs $ 5bn in the form of preference shares yielding 10 per cent . In 2011 , Goldman Sachs redeemed the shares , earning Buffett a profit of $ 3.7bn . Parker describes this as an “ obviously ludicrous opportunity ”, adding that John Pierpont Morgan and Joseph Kennedy also built great fortunes through taking advantage of similarly rare and binary investment opportunities . Of course , all of these men were already rich before pulling the trigger on these deals . Yet Parker says they also had something else in common : “ If you have a really long-term view , you are able to take more profound short-term risks .” trustnet . com