Bubble
Quotes!
It’s also conceptually squishy to equate “passive” investment with durable and reliable “price-insensitive” behavior. My impression is that all investors care about the long-term returns that they can expect from their investments.
It’s just that long periods of market advance inspire a dangerous confidence that valuations have nothing to do with long-term returns. Instead, they come to imagine that long-term return prospects are always positive, and therefore that any price is a good price.
If market history is clear on one point, it’s that this confidence can ultimately change on a dime.
John Hussman Ph.D of The Hussman Funds
*******************************************************
Strictly speaking, there can be no such thing as an ‘investment issue’ in the absolute sense, i.e., implying that it remains an investment regardless of price. The ‘new era’ doctrine – that ‘good’ stocks were sound investments regardless of how high the price paid for them – was only a means of rationalizing under the title of ‘investment’ the well-nigh universal capitulation to the gambling fever.
The notion that the desirability of a common stock was entirely independent of its price seems incredibly absurd. Yet the new-era theory led directly to this thesis… An alluring corollary of this principle was that making money in the stock market was now the easiest thing in the world. It was only necessary to buy ‘good’ stocks, regardless of price, and then to let nature take her upward course. The results of such a doctrine could not fail to be tragic.
– Benjamin Graham & David L. Dodd, Security Analysis, 1934
No comments:
Post a Comment