I’ve said numerous times, the most important lesson in The Intelligent Investor is Ben Graham’s Parable of Mr. Market. It’s a simple story for how the market works, how some investors view price movement, and how you should really view price movement.
But it’s also one of those stories that are easy to understand but harder to actually put into practice when market prices move wildly.
That said, I think it helps to see the market through the lens of (childish) behavior – temper tantrums, throwing fits, impulsiveness, hysteria…it’s all possible and more. You can take advantage of opportunities Mr. Market offers or you can do nothing but whatever you do, don’t let Mr. Market’s mood drive your own.
So whenever I come across a good version, told by someone other than Graham, I save it or post it here, as a reminder that the stock market is an exchange for pieces of businesses, not paper. The prices reflect Mr. Market’s mood toward the paper, not necessarily the value of the business.
Seth Klarman tells a great version in his book worth sharing: Continue Reading…