I got three ideas out of Ben’s book that have been the cornerstone of everything I’ve done, which are to look at stocks as part of a business rather than simply little things that go up and down. And then I took to heart his Mr. Market saga, which I think is vital to having the right attitude toward market fluctuations. Then third, the margin of safety.
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In a world that thrives on 24 hours a day financial news, inactivity is seen as brain dead.
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Euphoria can lift housing and dot-com prices; panic can send sound banks tumbling.
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Investors must appreciate that, while there is a pattern to events, no pattern is perpetual. The more widely-held the belief in the persistence of a current trend, the less likely it is to continue.
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If you are a value investor, every now and then you lag, or experience what consultants call tracking error. It can be very painful. To be a value investor, you have to be willing to suffer pain.
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Investors in distressed property are motivated primarily by the expectation that the equity value of a real estate asset acquired at less than its original cost-to-construct will in time increase to a point that justifies its original indebtedness.
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Developers are creating a product that meets the developer’s test of profitability, not necessarily the marketplace’s test of economic viability. If the developer believes the creation and presale of the product assure him a profit, then the discipline of the marketplace disappears and oversupply follows.
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“New industry psychology” is something to be watched for and taken advantage of in every big up-swing.
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One of the things you should always be doing with your circles of competence is see if you can push it a little bit more, because the world changes. It keeps spinning, and things don’t stay the same, so you always need to be working and learning and studying to make sure that your circles of competence are relevant.
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With every company I own there is always the question of sustainability, that a transformation in its industry will leave it behind.
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Using the outlook for the economy to predict the direction of the stock market, which most appear to do, has it exactly backward. The stock market’s behavior will predict the economy’s future behavior.
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By the time market declines (or advances) are front-page news, they usually have run their course.
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In general, the batting average of doomsayers in the U.S. is terrible. Our country has consistently made fools of those who were skeptical about either our economic potential or our resiliency.
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The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability — the reasoned probability — of that investment causing its owner a loss of purchasing power over his contemplated holding period.
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As “bandwagon” investors join any party, they create their own truth — for a while.
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What motivates most gold purchasers is their belief that the ranks of the fearful will grow.
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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 only fair to admit that the commonest and most expensive blunder that all exceptionally brilliant business men make is being right too soon.
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It is not the certainty of disaster ahead but the uncertainty of better days to come that keeps the investor from buying.
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The demand for reform is naturally greatest after a market crash, which is usually precipitated by multitudes of little gamblers who are themselves their own victims.
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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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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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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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