Martin Whitman had an illustrious career in the asset management industry. He was also a very vocal critic of various Wall Street practices and other topics of finance.
As an example, he was a staunch critic of many of the accounting standard adopted thorugh the Generally Accepted Accounting Principles (GAAP) in the country. Whitman is most known as the founder and chief investment officer of the Third Avenue Management.
Books by Marty Whitman
Whitman was an avid writer and was known for his detailed letters to fellow shareholders in the Third Avenue Value Funds. In addition to that, Whitman write both textbooks as well as more mainstream books that covered value investing and fundamental analysis.
Whitman published 5 books in total during his career:
- Modern Security Analysis: Understanding Wall Street Fundamentals
- Distress Investing: Principles and Technique
- Dear Fellow Shareholders…: Over 30 years of wit, wisdom, and value investing insights
- Value Investing: A Balanced Approach
- The Aggressive Conservative Investor
Early Life
Martin J Whitman was born in Bronx, New York to a Jewish family where he lived his young life. After serving in the US Navy during the Second World War, he returned to the New York state where he graduated with a Bachelor’s degree in Business Administration in 1949.
He later added a Masters in economics from the New School of Shoal research and worked for many different investment firms within New York City. It is, however, until 1974 that he founded his own company and his first major investment.
Using a purchase of $100,000 worth of mortgage bonds, he grasped an opportunity at the Penn Central Railroad, which risked running bankrupt. He profited by selling up to five times his original buying price
Accounting Principles
Using the quarterly shareholder letters of his fun as a running critique, he succeeded in his quest to create wealth by flows. In his explanation, Whitman mentions that positive earnings and cash flows are the primacy of the income account. He said that this achievement only served short-term speculators and was not long-term oriented.
In his latest response to GAAP, Whitman mentions that they increasingly impose an unnecessary and counter-productive burden on American Corporations, management, and capital markets. It, therefore, ought to be focused on meeting the needs and desires of creditors. However, it is based on market speculations limiting its role in helping the entrepreneurs. Although his philosophy is controversial, it is acceptable by many of his peers and is among the few things in his opinion that he shares with competitors and investors.
He further observes that the amount of money invested in credit instruments leads to dwarfing of the amount of funds invested in equities. Given a choice, most companies opt to enhance net asset value, which I taxable at maximum rates hence limiting the chances of growth
Economic View
Although a strong supporter of capitalism naturally, Mr Whitman remained a huge critic of free markets as explained by Milton Friedman and Friedrich Hayek. The analogies are driven by the belief that the government is bad while the private sector is the alternative.
In well-run industrial economies, the government instruments merge with the private sector to benefit each other for rapid and sustainable growth in the economy. This, he points out is well illustrated by the Japanese, Chinses, Swedes, and Singaporeans, among others. The government plays a major role in controlling persons for maximum mutual benefits between the two systems running the economy of a country
Personal life
Martin married Lois Whitman who is an attorney and social worker. She has founded and lead the Children’s Right Division at the international rights monitoring organization. Together they have three children and six grandchildren.
Not much is known about his personal life outside of the occasional appearance of the family together. He keeps his private life separate from his normal duties and will rarely mention them in public. This choice to keep them safely out of the limelight is a welcome opportunity to give them a chance to live normal lives without interference with fame.
Retirement
After many decades of active business activity, Whitman announced his retirement. He had accrued $3.2 Billon at Third Avenue Value Fund. He handed over responsibility to his longtime co-manager Ian Lapey in early 2012
Books
Martin Whitman has written several books on investment and finance such as Value Investing: A Balanced Approach, Distress Investing: Principles and Technique, The Aggressive Conservative Investor, and Modern Security Analysis: Understanding Wall Street Fundamentals with the help of other economists and investors.
Work Ethic
Martin Whitman’s strong principles in economics can be reflected in the way he works. The core values of his companies are embedded in his strong beliefs in the role of ethics at work. He has formed significant solutions to control and manage his staff to his core values. His influence can be seen through the many years in charge and success thereof. Many people working under him have learnt the principles of discipline and orderly structures for perfect outcomes.
Accomplishments
With the first purchase of $100,000 in mortgage bonds, Whitman was set to begin his career. He had his vision straightened out when he grasped this opportunity at the Penn Central Railroad. It was at a time when the company risked running bankrupt and became his perfect timing. He profited by selling up to five times his original buying price and learnt many accounting Principles from then. For example, using the quarterly shareholder letters of his fun as a running critique, Whitman began to create wealth by flows.
He is a strong opponent of GAAP and was quoted recently asserting that they increasingly impose an unnecessary and counter-productive burden on American Corporations, management, and capital markets. In his opinion, it should instead be focused on meeting the needs and desires of creditors. However, it is based on market speculations limiting its role in helping the entrepreneurs.