Financial Mail and Business Day

STREET DOGS

The market may be crazy, but that doesn’t make you a psychologist.

— Meir Statman

● It’s easy for investors to claim that market prices don’t make sense because it’s often true: market prices don’t make sense most of the time. But the job of any successful investor is not to spend their time pointing out this fact. The job of a successful investor is to understand why prices are where they are. Every single market environment is different. Investors need to calculate probabilities from the past, but they also need to analyse the present to provide context for understanding the situation. Investors are constantly questioning whether the market is wrong. It would be far more helpful if more investors questioned whether they are wrong about the markets. — Ben Carlson

● What efficient markets are associated with which is wrong is that efficient markets mean that the price is always right — that the price is exactly the present value of all of the dividends and the earnings that are going to come in the future and the price is perfectly right. That’s wrong. The price is never right. In fact, prices are always wrong. What’s right is that nobody knows for sure whether they’re too high or too low. It’s not that the prices are always right, it’s that it’s never clear that they are wrong. The market is very, very difficult to beat. — Burton Malkiel

● Seven habits that help produce the anything-but-efficient markets that rule the world:

1. Think short term. 2. Be greedy.

3. Believe in the greater fool.

4. Run with the herd. 5. Overgeneralise. 6. Be trendy. 7. Play with other people’s money. — Paul Krugman

● Mistaken professors have been too much influenced by “rational man” models of human behaviour from economics and too little by “foolish man” models from psychology and real-world experience. — Charlie Munger

THE BOTTOM LINE

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2021-06-15T07:00:00.0000000Z

2021-06-15T07:00:00.0000000Z

https://timesmedia2.pressreader.com/article/282016150275200

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