From the October 2008 Graham & Dodd Breakfast (via Outstanding Investor Digest):
In terms of our firm, I tried so hard to learn the lessons of 1998 in particular, which were: Don’t be unprepared for something out of the blue that’s really bad.
To some extent, we were prepared this time. However, you can never be prepared enough. We had a lot of macro protection in terms of credit default protection on bonds where we were just betting that credit spreads would widen. That’s been incredibly helpful. But we’ve gotten really tired of buying market puts, or anything like that, because they inevitably are expensive and expire worthless.
So as an investor, you have terrible trade-offs. Do you overpay for insurance — or do you go uninsured? That’s just one of those dilemmas for which there are really no perfect answers.