By the time market declines (or advances) are front-page news, they usually have run their course.
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One of the brightest operators who ever played the unbeatable game once told me that all he asked in a bull market — or a bear market, for that matter — was to be the last fool but one.
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It is an old cliché that they don’t ring a bell at the tops and bottoms of markets, but it is not entirely true. Occasionally someone climbs up in the belfry and does just that, as a public service, but knowing that few are likely to heed the bell.
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Bull markets typically begin when the following four conditions are present: the economy is bottoming, profits are bottoming, the Fed is stimulating, and valuations are low.
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It’s much more stressful to me when the market’s soaring and everybody’s excited, and everybody’s talking about how much money they’re making.
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We may forgive ourselves for owning a market dullard when the rest of the market is also in the doldrums, but it is disheartening to see one’s favorite resting as quietly as a castor-oil bottle while the rest of the market goes gaily upward.
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It is foolhardy to shut our eyes and buy just any stock because of prospects for a substantial rise in the general averages. Though in a bear market nearly every stock goes down, in a bull market not all stocks advance.
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An old saying is that in a bull market, your time horizons grow longer and longer. In a bear market, they grow shorter and shorter.
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One of the important factors behind the fluctuation between bull and bear markets, between booms and crashes and bubbles, is that investor memory has to fail us – and fail universally – in order for the extremes to be reached.
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A lot of people when they get negative on the market put 50% in cash, but unfortunately a lot of times when you get to that position it’s just about when the market’s about to rally.
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My mission isn’t to make money in bull markets. My mission is to preserve capital.
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There is a considerable tendency for common stock investors to do the greater part of their buying, both of “good” and “bad” securities, at high levels of the market. They are equally inclined to do the greater part of their selling at low levels of the market, a procedure which is not conducive to successful results.
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It is a curious fact that although all booms are alike, all are different.
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Cash really hurts if you hold it very long in an equity market that is compounding at close to 20% per annum.
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It may be a fair generalization to assert that the top levels of most “normal” bull markets are characterized by a tendency to equate stock risks with bond risks.
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Happy is the man who has no past! The same seems to be true of corporations in a bull market.
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Buying stocks of prosperous concerns may be good business — but only at a certain price. But if you will make sure you know what you are getting for your money, you will be doing what nobody does in a bull market.
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Laws have been passed to outlaw some of the more egregious behavior which contributed to the big bull market of the twenties. Nothing has been done about the seminal lunacy which possesses people who see a chance of becoming rich.
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History shows us, over and over, that bull markets can go well beyond rational valuation levels as long as the outlook for future earnings is positive.
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If the market’s going wild and you want to be in it, you either have to lower your standards to stay in the game or you buy stuff which may not participate because it’s not part of the game at that time.
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If you looked at September 1986 to October ’87, the market was unchanged. It had a thousand points up and a thousand points down and they only remember the down.
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The novice soon learns that stocks are likely to maintain an upward or downward trend for long periods of time with minor interruptions of the major trend.
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People who exit the stock market to avoid a decline are odds-on favorites to miss the next rally.
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Missing the bottom on the way up won’t cost you anything. It’s missing the top on the way down that’s always expensive.
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The man in the street associates the acquisition of wealth with rising markets; failures, ruin, depression, panics with falling markets.
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Whenever you get a wild excess on the upside, the following correction doesn’t just go back to normal; it almost always falls way below normal.
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Once a boom is well started, it cannot be arrested. It can only be collapsed.
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Booms start with some tie-in to reality, some reason which justifies the increase in asset values, and then — and this is the critical feature of speculative mood — the market loses touch with reality.
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Participation in the stock market is not limited to the experienced, the conservative, nor even the intelligent. It is a game at which any number of people may play. And as the market level rises, the quantity of players grows rapidly and their quality diminishes somewhat in proportion.
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My experience teaches me that by far the largest losses have been sustained by investors through buying securities of inferior quality under favorable general conditions.
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In the halcyon days of prosperity, the investor is satisfied with increased dividends and a rising market, and cares very little about dry statistics.
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The only thing you can be sure of is that there are times when large numbers of stocks are priced too high and other times when they’re priced too low.
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A large advance in the stock market is basically a sign for caution and not a reason for confidence.
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Experience in former markets indicates that just as they are too high in bull markets, they get too low in bear markets.
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It is usually a much simpler matter to forecast a bull market than to call the turn at its end.
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Bull markets and bear markets last long enough so that the average trader is likely to forget by the time the climax is approaching that any sort of movement is possible.
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It takes a great deal of nerve to cling to a short position in a stock in the face of an advancing market even though the stock may clearly be overvalued.
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We would rather underperform in a huge bull market than get clobbered in a really bad bear market.
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Every economic recovery since World War II has been preceded by a stock market rally. And these rallies often start when conditions are grim.
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