Stock market efficiency is an elegant hypothesis that bears quite limited resemblance to the real world.
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Higher risk investments often erode one’s capital and produce lower returns — the worst of all investment worlds. Higher-returns-for-higher-risks only applies on average and over time.
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There is always a tension in the financial markets between greed and fear.
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I think investors always learn the lessons of the recent past. And that is the lesson.
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Everybody can talk about the problems, but very few investors act on them.
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In my view, predicting future private market value is like predicting future Dow Jones levels: It doesn’t make any sense at all.
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Value to some extent is in the eye of the beholder. It is very hard to pin down what the value of a future set of cash flows from a business, be it cable TV or biotechnology, is going to be.
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When the next fear-inspired panic occurs, investors’ finger-pointing will almost certainly be aimed outward, while a good part of the blame should instead be directed inward.
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People seeking answers to why the market plunged usually emphasize the immediate events that precipitated a selling panic, when in fact these events are but minor symptoms of much more severe underlying problems.
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Mutual fund managers, desperate to put cash to work don’t buy what is cheap but what is working since what is cheap by definition hasn’t been working.
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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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Just because we think a stock is undervalued doesn’t mean we’re right. We may be wrong in our judgment.
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I like the idea of having a little action. That may not be good from a logical point of view, but it’s good from an emotional point of view.
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If you don’t like to lose money and it affects your judgment, don’t buy things that can go down a great deal.
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One of the things you learn in this business is humility because you see your mistakes the next day.
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The problem in investing, I think, is timing. You may be right. But in the long run, we’re all dead. Even if you’re right, if it takes 20 years to work out, it can be a disaster.
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You have to say to yourself, “If I’m right, how much am I going to make? If I’m wrong, how much am I going to lose?” That’s the risk/reward ratio.
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If you don’t understand a company, if you can’t explain it to a 10-year-old in 2 minutes or less, don’t own it.
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I don’t think people understand there’s 100% correlation with what happens to a company’s earnings over several years and what happens to the stock.
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Spinoffs have a terrific, terrific record in my lifetime. When companies get spun off, something seems to happen to them. They get better run, even though they were well run before.
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There is no Ground Hog Day, when all the economists come out from the tunnel and declare the recession is over. They have a retroactive, seasonally-adjusted Ground Hog Day.
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Every time you have one of these recessions, there are always groups who say it is different this time. We won’t get out of this one.
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A lot of my stocks don’t work. The beauty of the stock market is that if you are wrong, if you put $1,000 up, all you lose is $1,000. I have proven that many times.
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