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We're all I assume everybody here is in the investment business. What do we do? What do you do? What is your job? Oh, it's to manage money. No. What is the job of the money manager? And the answer, I think, is that everything we do falls into one of two categories. Asset selection and cycle positioning.
Asset selection is trying to hold more of the things that will do better and less of the things that will do worse. And cycle positioning means trying to hold a more have more money invested more aggressively when the time is right and less money invested more defensively when the timing is wrong. Positioning for the cycle.
Those are the two things we do. I don't think there's anything we do that doesn't fall under one of those two headings. And accepting that there is no better or worse time for defense versus offense means giving up on the ladder, tying one hand behind our back. And I think it's a mistake. I think we can at the especially at the extremes increment our po per performance by being aggressive at the right time and defensive at the right time.
There are times for aggressiveness and there are times for caution. When prices are low, pessimism is widespread and investors flee from risk. That's the time to be aggressive. When prices are high and enthusiasm is rampant and investors are risk tolerant, that's the time for caution, which is this.
That's the question. Very simple question. Not always easy to answer, but a very simple question. Do you agree that sometimes it's better to be on offense or sometimes on defense? Do you agree that these are the things that determine those times which is this very simple? So the decision today these are the questions to ask to try to figure out which this is.
Are investments rich or cheap? Where do we stand in the market cycle? That's what the book is all about. How should we be positioned versus our normal risk posture? Every one of you and every client and every institution should have a normal risk posture based on your financial condition, your aspirations, your ability to stand pain, your emotional constitution, uh your needs, etc.
That's your normal position. Where should we be today visav our normal position? Should we be emphasizing offense or defense today? Should we worry more about losing money today or worry about missing opportunity? Now this is very important. Every one of us in this room faces two risks every day. The obvious risk that everybody knows about and nobody likes is the risk of losing money.
The more subtle risk which not everybody thinks about is the risk of missing opportunity. Now you could say Howard, I want to be sure that I don't ever lose a penny. I don't want to ever have a down day in my portfolio. I couldn't take it. I say, "Okay, we'll put you all in 30-day bills. You'll never have a down day and you'll miss all the opportunities." But if you say, "Look, I'm a young guy.
I have a big risk tolerance. I I know what I'm talking about here. I don't I want to make sure I don't miss any opportunities." Then we say, "Okay, no treasuries for you." And now you are 100% exposed to the risk of losing money. So the point is you can eliminate either risk which puts you entirely at the mercy of the other risk or you can balance them.
And what do most people say? Well, I don't want to lose a lot of money, but on the other hand, I don't want to miss all the opportunities. So, I'm going to operate in the middle. I'm going to have I'm going to have some risk of losing money and some risk of missing opportunity. And most of us maintain a balance somewhere in the middle.
hopefully as is appropriate for our circumstances and our client's circumstances. And then the next question is visav your normal balance of the two risks. What should your balance be today? Do you believe in trying to change the balance as the environment changes or are you just a buy and hold investor?
And it's not necessarily wrong because changing it with the is is not easy to do. Uh or or do you want to give it a
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