Farnam Street October 2018 Letter: The Arrogance Of Investing, Mr Market Revisited, Today’s Dangerous Valuations And Twenty seconds!Jacob Wolinsky
Farnam Street letter to investors for the month of October 2018.
The Arrogance of Investing
Buying a stock is an act of sheer arrogance. It’s easy to forget, but there’s always someone on the other side of every trade. When you buy, you are saying, “What a dummy! I can’t believe they parted with their ownership of this company for such a low price. I must be smarter / more-informed / more-disciplined than they are. What luck!”
Every time you sell, there’s the same arrogance: “I can’t believe they took that company off my hands for such a high price! I must be smarter / more-informed / more-disciplined than they are. What luck!” The time frames matter: you can be right in the short-term and wrong in the long-term, or vice versa. But in nearly every instance, someone is right and someone is wrong when making a trade. How sure are you that you aren’t the dumb money on the wrong side of the trade? Warren Buffett is fond of the poker aphorism: “If you’ve been in the game thirty minutes and you don’t know who the patsy is, you’re the patsy.”
Mr. Market Revisited
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