The Portfolio Meets The Market

Competition among portfolios takes place in a market that changes as well, with the changes having different effects on the investors, for example:

  • Prepayment risk
  • Mortgage supply
  • Mortgage spreads
  • Spreads and supply in competing assets
  • Changes in interest rates

These things can move around in ways independent of the strategies of investors, although changes in strategy definitely can push these factors around, and vice versa. Certain portfolios end up better positioned than others to take advantage of market developments. Portfolios that do find themselves in good position to buy the right assets at the right time often seem, to others, just lucky. But good planning—the building of a flexible and inexpensive funding base, the prudent use of leverage, and management of the accounting and regulatory environment—can make its own luck. As Branch Rickey, the storied leader of the Brooklyn Dodgers baseball team often noted, luck is the residue of design.

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Lessons From The Intelligent Investor

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

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