Skimming for Safety-Net Gems

It's challenging, to say the least, to spend a portion of the week thinking about how Ben Graham might behave in the current era. In Graham's era, the market didn't have the institutional dominance that exists today. There were no futures or options markets for equity traders, and it was a much more lax operating environment in terms of regulation. There was no high-frequency trading, nor were there discount brokers. No financial television blared a wide range of thoughts and meaningless predictions at us all day. Could Graham's approach work in this new, much-more-complex version of the financial markets?

Obviously, I think it would. The caveat here is that, if you want to use Graham's methods in today's equity markets, you are not going to be the biggest kid on the block. If you want to be a billionaire fund manager who is on Page Six of the New York Post with executive jets, this is not the approach for you. Even the best value managers today -- the ones who are closest to the Graham methods -- apply his approach to markets beyond equities. Seth Klarman at Baupost reminds me most of Graham, and his portfolio is only about 20% equities; the rest is in asserts such as real estate and distressed debt....630 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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