On October 24, 1929, millions of Americans recalled poignantly the hundreds of blithe prophecies that our feelings never again would be harrowed by absurd exhibitions of mob hysteria or mass emotionalism in the stock market. We were living in a new era.
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All of the great investing periods begin when things are terrible and end when they are wonderful.
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My view is that it is different every time, and that the relevant analytical exercise is to figure out what the differences are, what the similarities with past periods are, and what it all means, so that one can make sensible investment decisions.
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About the only advantage of being old in this business is that you have seen a lot of markets, and sometimes market patterns recur that you believe you have seen before.
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As history has taught us, most of the time, most of the crowd moves long after the optimum time to have moved is passed. So it is with investment trends, which start with the belief of a few and end with the conviction of the many.
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Extrapolating existing conditions too far into the future is likely to lead to disappointment. But as long as people continue to make this mistake, and as long as the market consensus reflects it, history will continue to repeat itself in Wall Street.
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Reliance on historical perspectives must be tempered by individual market analysis.
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It is probable that more money was lost after the panic of ’29 than during the panic, because prices then seemed so low that people didn’t pause to consider whether prices were low on the way up or on the way down.
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Knowledge of the past is indispensable to understanding and managing the future.
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Never before had there been such gambling as there was in those last turbulent years of the ’20s, but few people realized they were gambling — they thought they had a sure thing.
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If we take a long look at the performance of common stocks over recorded market history, we find that they have indeed been a good investment — providing, of course, that the investor has had a hundred years or so to play the market.
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It is a curious fact that although all booms are alike, all are different.
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In the history of every great catastrophe, you will find that some masterly bit of stupidity sets fire to the oil-soaked rags.
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Of all the mysteries of the stock exchange there is none so impenetrable as why there should be a buyer for everyone who seeks to sell. October 24, 1929 showed that what is mysterious is not inevitable. Often there were no buyers, and only wide vertical declines could anyone be induced to bid.
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Hoaxes, frauds, manias, and other large-scale financial irrationalities have been with us from the beginnings of the markets in the seventeenth century, long before the Internet.
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We deceive ourselves when we believe that past stock market return patterns provide the bounds by which we can predict the future.
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In Wall Street, what has happened before will happen again. It must, as you will admit if you stop to think about it.
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The trading favorites of 1928 were high-priced, untried, and unseasoned stocks that made one wonder whether the public did not think that the higher the price the better the stock.
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The lesson of history is that norms are never normal forever. Paradigm shifts belie blind faith in regression to the mean.
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The history of the stock market shows many periods of twenty years or more when stock prices ended up precisely where they began.
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I had a margin call in 1924, and I swore I never would buy on margin again. That’s one of the main reasons I got through the 1930s.
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The tour we’ve taken through the last century proves that market irrationality of an extreme kind periodically erupts — and compellingly suggests that investors wanting to do well had better learn how to deal with the next outbreak.
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We learned in the ’20s that markets with participants playing heavily on margins could be more dangerous than markets where people are dealing in cash.
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Real life is not a random draw but a connected sequence of events in which each event is the consequence of the preceding event.
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Volatility is not risk. And historic volatility does not necessarily project future volatility.
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I think investors always learn the lessons of the recent past. And that is the lesson.
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All of history and all of life is stuffed full of the unexpected and the unthinkable.
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The constant lesson of history is the dominant role played by surprise. Just when we are most comfortable with an environment and come to believe we finally understand it, the ground shifts under our feet.
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While we can learn from the long run about how bonds and stocks respond to changing environments and to each other, the long run can tell us perilously little about what kinds of environments lie ahead.
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The strange revolutions wrought by time are nowhere so evident as in the securities market, where an accurate comparison of the present with the past is afforded by the price record over a period of years.
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They used to say about the Bourbons that they forgot nothing and they learned nothing, and I’ll say about the Wall Street people, typically, is that they learn nothing, and they forget everything.
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It is a safe prediction for me to make that, in future years as in the past, common stocks will advance too far and decline too far, and that investors, like speculators — and institutions, like individuals — will have their periods of enchantment and disenchantment with equities.
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I think the future of equities will be roughly the same as their past; in particular, common stock purchases will prove satisfactory when made at appropriate price levels.
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No prediction — whether of a repetition of past patterns or of a complete break with past patterns — can be proved in advance to be right.
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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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I believe that the trend of stock equities will continue in the future as it has in the past — and that is irregularly upward, with some emphasis upon the adverb irregularly.
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The broad pattern of market action in the past is the best guide to the future — but it is not an infallible guide.
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