Quote for the Week

If you can get into a great company, stay in for a long time. That’s the easiest and biggest money you’ll possibly make. But it’s so hard to do, because they bid the great companies, or things that look like great companies, up so high that it makes that strategy not work… So that’s the trouble, is that they sell so high priced that they make it hard for you to get. But wouldn’t you expect that? Why would you expect that something everybody can see is a great company, of course they’re going to bid the price up so high that maybe it’s not such a good investment. — Charlie Munger (Source)

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Quote for the Week

You have all these smart people out there. The money doesn’t go to the people with the highest I.Q. There would be a very poor correlation between I.Q. and investing and results. And you say to yourself why does somebody with a 500-horsepower motor only get 100-horsepower out of it? And I would say that if you look at the intellect as being the horsepower that’s available, but you look at the output as reflecting the efficiency of that motor, it is rationality that causes the capacity to be translated in output.

Now what interferes with rationality? It’s ego. It’s greed. It’s envy. It’s fear. It’s mindless imitation of other people. I mean, there are a variety of factors that cause that horsepower of the mind to get diminished dramatically before the output turns out. And I would say if Charlie and I have any advantage it’s not because we’re so smart, it is because we’re rational and we very seldom let extraneous factors interfere with our thoughts. We don’t let other people’s opinion interfere with it. We don’t get– we try to get fearful when others are greedy. We try to get greedy when others are fearful. We try to avoid any kind of imitation of other people’s behavior. And those are the factors that cause smart people to get bad results. — Warren Buffett (source)

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When it comes to investing, it’s often what you don’t do that matters most. The best example of this is misbehavior.

Unfortunately, not nearly enough investors see it that way. And why should we? We’re bogged down with messages about owning the right investments for today’s environment. Which leads to forecasts and market timing. Two things we’re terrible at, by the way.

Besides, when patience and fortitude are cited as reasons behind investing success, it comes off as too easy…at first. A few decades of experience might challenge that perception.

Investing is a long-term game, that requires long-term patience at the risk of being constantly distracted from that effort. We’re tempted by headlines and market moves to act on a daily basis.

Sometimes the distractions work. We like stories and headlines offer simple explanations — that link cause with effect — for why the market did what it did that day.

It doesn’t matter if the story is wrong. Markets are too complex to pinpoint the sole reason behind a day’s action. Our simple brains prefer the stories because they present an illusion of control over the outcome and often fill in as a scapegoat for why we lost money. That’s better than the alternative. We prefer to believe that outcomes are controllable rather than being at the whim of chance. Continue Reading…

Quote for the Week

Someday I’m going to write a piece called “The Perils of Brilliance.” The times I have been most wrong are the times I thought I was most right. You asked me at the beginning about the things I’ve learned from all of this, and I have to repeat: It’s humility. I think the reason I’ve been able to survive 55 years in this business is because I developed humility, at least after 1958. It’s the only way to survive — not necessarily to be the top quartile — but survival is really the name of the game we’re playing with long-term considerations. — Peter Bernstein (source)

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