After many years of studying Wall Street’s victors and victims, I must conclude that the American public still insists on losing its savings every time the old hook is baited with the immortal easy-money worm. After every smash the blame is laid on the hook and not on the hunger.
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Firmly believing that stock speculation is an unbeatable game, I have come to the conclusion that while no bear operator ever made a large fortune in the stock market and kept it, unless he trusteed it, the greatest losses are sustained by the bulls, not because they are bulls, but because there are more of them — more optimists than pessimists.
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The public today is just as eager to buy a mystery as it was fifteen years ago or fifty years ago. The psychology of greed and cupidity has not changed appreciably.
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It is one of the maxims of speculation that stocks never go up, but must be put up.
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One of the speculators’ hells consists of thinking of the money you didn’t make. If you had only done what you ought to have done, but didn’t!
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A man who has bought a stock against the advice of a conservative broker, and has doubled his money in a fortnight, finds his suspicions turned into convictions by the impartial judge, the stock ticker.
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A gambler seeks and makes risks which it is not necessary to assume, whereas the speculator is one who merely volunteers to assume those risks of business which must inevitably fall somewhere.
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The chief evils of speculation flow from the participation of the general public, who lack the special knowledge, and enter the market in a purely gambling spirit.
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A great mob of easily led investors, eagerly searching for “straight tips” which may bring instant wealth, make their mistake in common, and when the mistake is disastrous they try, en masse, to escape.
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Having a long term strategy may seem a quaint idea in a market dominated by high frequency trading, the 24 hour news cycle, the ubiquitous and shrill blogosphere, flash crashes, and where it is repeated as though divinely given that buy and hold is dead.
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The investor is bombarded with staggering amounts of information, staggering amounts of stimuli that are designed to get the investor to buy and sell and trade, to do exactly the wrong thing, to create excessive profits for these intermediaries that aren’t acting in the investor’s best interests.
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Institutional investing, as it is structured today, simply makes it more difficult to make a high-conviction, long-term decision than to make a low-conviction, short-term decision. The rewards of short-term results substantially superior to the market, and the penalties of short-term results well below the market, are awesome.
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Over the very long run, it is the economics of investing — enterprise — that has determined total return; the evanescent emotions of investing — speculation — so important over the short run, have ultimately proven to be virtually meaningless.
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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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It is dangerous for any speculator to set up preconceived ideas as to how low or how high a stock or a group of stocks should go. His judgment should be formed from a series of observations, continuous from the time of his original purchase.
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I believe denying clients the ability to be hyper-traders is doing them a favor. Most people are not adept enough to take advantage of short-term mis-valuations, and I put myself in that category.
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There has always been, and will always be, windfall profits. At any point in time, certain people are being enriched unjustly because they get there very early.
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Plungers normally get their head and their assets handed to them eventually.
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For years I have contended that the average speculator does not lose his money in Wall Street. He loses it wherever he happens to be the instant he decides to let the ticker put unearned dollars in his pocket. The game does not beat the player; he beats himself.
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Not even the “safest” investment is without some risk and some element of speculation.
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I think people trade too much, looking for short-term gains. But I don’t think you should hold stocks indefinitely.
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As a science, I should say that chart reading shares a pedestal with astrology; but most chart readers have far too much education and mental discipline to consider astrology seriously.
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There has always been a considerable number of pathetic dopes who busy themselves examining the last thousand numbers which have appeared on a roulette wheel, in search of such a repeating pattern. Sadly enough, they have usually found it.
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I think I am safe in asserting that the margin trader, speculator, gambler, or whatever you choose to designate the average man who goes to Wall Street after easy money, does not lose money when he sells. He loses it when he buys!
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Intelligent speculators and investors who do not play the market feverishly do not need to spend the day beside a ticker or before a quotation board.
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Anything that helps make addicts out of occasional traders should be avoided as if it were the bubonic plague.
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When investors — individual and institutional alike — engage in far more trading –inevitably with one another — than is necessary for market efficiency and ample liquidity, they become, collectively, their own worst enemies.
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Individual investors tend to churn their accounts, they tend to trade too much, and that they trade too much seems to be due to over-confidence. They believe they know something that they do not know and this is one essential characteristic of human beings, which makes them different from rational beings.
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You only need one or two good stocks a decade. You don’t need a lot of action.
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We are sort of the polar opposites of a lot of investors. We do a lot of thinking and not a lot of acting. A lot of investors do a lot of acting, and not a lot of thinking.
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The more you trade, the harder it is to add value because you’re absorbing a lot of transaction costs, not to mention taxes.
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Tradition, sentiment, vague generalizations, unsubstantiated rumors, can never be made the basis of sound investment or intelligent speculation. Now and then large profits are realized on no better foundation — merely proving that sometimes luck laughs at logic.
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The propensity to gamble is always increased by a large prize versus a small entry fee, no matter how poor the true odds may be.
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What we do know is that speculative episodes never come gently to an end. The wise, though for most the improbable, course is to assume the worst.
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I didn’t get rich by buying stocks at a high price-earnings multiple in the midst of crazy speculative booms, and I’m not going to change.
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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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It is one of the common pieces of Wall Street experience that when the public goes stock mad and the market leaders are filled with the arrogance of prolonged success, such little things as high money rates or decreases in earnings or unraised dividends have no instant effect on the market — that is, on the state of mind of the speculating public. In the end, of course, all violations of the fundamental laws of economic and financial common sense are paid for; but every bull thinks he will unload before the break.
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“Easy money” means only one thing when it means money that has come easy: It means money goes even more easily than it came.
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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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When people think there’s easy money available, they’re not inclined to change.
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I would rather sustain the penalties resulting from over-conservatism than face the consequences of error, perhaps with permanent capital loss, resulting from the adoption of a “New Era” philosophy where trees really do grow to the sky.
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There is nothing at all conservative, in my opinion, about speculating as to just how high a multiplier a greedy and capricious public will put on earnings.
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Any form of hyper-activity with large amounts of money in securities markets can create problems for all participants.
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I will not abandon a previous approach whose logic I understand even though it may mean foregoing large and apparently easy, profits to embrace an approach which I don’t fully understand, have not practiced successfully and which, possibly, could lead to substantial permanent loss of capital.
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We live in an investment world, populated not by those who must be logically persuaded to believe, but by the hopeful, credulous and greedy, grasping for an excuse to believe.
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It makes no sense for individual investors to jump in and out of the market. People who trade in that way rarely die rich, whereas the patient investor often does.
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Any time you offer a big prize for a small amount of money, you encourage stupid behavior on behalf of those you’re appealing to.
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Buy only what you understand, believe in, and intend to stick with — even when others are chasing the next miracle.
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I know plenty of guys who consider themselves to be long-term investors but who are still perfectly happy to trade in and out and back into their favorite stocks.
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The line I draw in the sand is that if an asset has cash flow or the likelihood of cash flow in the near term and is not purely dependent on what a future buyer might pay, then it’s an investment. If an asset’s value is totally dependent on the amount a future buyer might pay, then its purchase is speculation.
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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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The first task of the bargain hunter is to narrow the field and separate the solid prospects from the ones that are counting on hopes, prayers, and miracles.
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Avoid long shots. I’ve bought about 30 long shots in my life. I’ve never broken even on one.
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The average trader is naturally a chronic bull. It is human nature to prefer optimism to pessimism.
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To lose money is the conventional penalty for bad judgment in speculation.
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The stock market itself seems to be mainly driven by fashions and fads. However, when you look at individual stocks, it’s a different story, because individual stocks are much more diverse, and some of them can be predicted to perform well over the long run.
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When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.
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Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation.
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Speculation is a loser’s game. Because of the costs, it has to be a loser’s game.
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Almost any asset can be risky or safe, depending on how other investors treat it.
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Speculation, I imagine, is a theme almost as popular as love; but in both cases most of the comments made are rather trite and not particularly helpful.
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Speculative operations are all concerned with changes in price. In some cases the emphasis is on price changes alone, and in other cases the emphasis is on changes in value which are expected to give rise to changes in price.
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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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Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic values; the “prudent stock investor” as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.
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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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The chief hazard of a careful common stock program is not that it may bring unexpected losses, but that its profits will turn the investor into a speculator greedy for quicker and bigger gains — and therefore headed for ultimate disaster.
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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 typical experience of the speculator is one of temporary profit and ultimate loss.
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People without experience or superior ability may make a lot of money fast in the stock market, but they cannot keep what they make, and most of them will end up as net losers.
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The investor must recognize that there are uncertain, and hence, speculative elements inherent in any policy he follows.
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The higher the quality of a company the more inescapable is the speculative component in its price, and the more subject it is to wide price variations.
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Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic value; the prudent stock investor as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.
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When stocks are rising for no better reason than that they have risen, the greater fool is at work.
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Allied to the general pattern of market movements is the general pattern of speculative thinking.
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If the relative stability of general business and corporate profits produces an unlimited enthusiasm and demand for common stocks, then it must eventually produce instability in stock prices.
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Good common stocks are investment media which are subject to speculative influences. The speculative influences are not in the common stocks; they are in the minds of the people who buy and sell them.
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The problem of investment in common stocks is either to insulate yourselves from the speculative influences, or else to adjust your investment policy so that you can take advantage of the speculative fluctuations that are imposed upon the basic investment quality of common stocks.
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