- “What were securities created for in the first place? They were created to be sold.”
- “Figures don’t lie. But figures, as used in finance, seem to have the bad habit of expressing a small part of the truth forcibly, and neglecting the other part.”
- Advisors, analysts, and economists all engage in wishful thinking in predicting the market: “The immature mind has a regrettable tendency to believe, as actually true, what it only hopes to be true.”
- History can be useful as a guide, but not as a precise forecasting tool. It repeats itself, but only slowly and with many variations. Similar to weather forecasting—beyond a few days, only the patterns of seasonal temperature are useful, not to be used for precise temperature forecasts.
- “Like all of life’s rich emotional experiences, the full flavor of losing important money cannot be (adequately) conveyed by literature.” You must lose real money to really experience it.
- Do not overestimate personal skill from luck. All business is speculative. Personal effort will account for much of success or failure, but the economic circumstances will account for more. The prudent thing to do for a rich person is often to do nothing. Stay home. Do not gamble in business or the stock market. But that is a dull life.
- Mutual fund investors are often faced with investing with the “smart crooks” or “honest boneheads”. The SEC has enacted a lot of good legislation against mutual fund abuses. “Sadly, there can be no legislation against stupidity.”
- Like fashion, investments that are considered “the best” change from period to period. “The pathetic fallacy is that what is thought to be the best are in truth only the most popular—the most active, the most talked about, the most boosted, and consequently the highest in price at that time.”
- Unfortunate downsides to prosperity: while in the 1920’s there was little poverty, “there was also very little grace, taste, or humility”.
- “Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.”
- Eventually, “booms go boom”.
- “When there is a stock market boom, and everyone is scrambling for common stocks, take all your common stocks and sell them. Take the proceeds and buy conservative bonds. No doubt the stocks you sold will go higher. Pay no attention to this—just wait for the depression which will come sooner or later. When this depression—or panic—becomes a national catastrophe, sell out the bonds (perhaps at a loss) and buy back the stocks. No doubt the stocks will still go lower. Again pay no attention. Wait for the next boom. Continue to repeat this operation as long as you live, and you’ll have the pleasure of dying rich.”
- “A man’s true wealth is his income, not his bank balance.”
- Full investor education would not result in orderly markets. It would actually cause more chaos. Without disagreement, as all trades would be one-sided, and there would be no-one willing to take the other side.
Finished: 22-Jan-2009