(Originally scheduled for every Monday morning because of the recent posting Notes pressing reason to write the manuscript has been delayed. The broader market is still leisurely break up the gap there is always shock and even small adjustments, but the split step into the footsteps of the bull market is not will stop. In the bull market will come on the occasion, I had the honor of their investment once again made a clear idea, a lot of data during the read, read Warren Buffett once again. Not only this, an invitation by the Press , I take advantage of this opportunity to learn once again to complete a out and share with my friends, can be considered again, I know .-- Economic stabilization Buffett)
1, the investment community, when you have against the mainstream wisdom, you will greatly increase investment opportunities. Application value of the investment law, it must have the ability to buy in the public crazy when you sell, buy when you sell in the public crazy, and even more good times when things seem to hold a suspicion. But even seasoned investment people, to do this is quite difficult, which is like casino slot machines to see within an hour with burst 10 awards, or stock prices rose two months has doubled, but you have not investment is the same approach.
essence, value investing is not just a method, it is also a kind of psychological characteristics of personality to show, by the experience, knowledge and desire to make money formed state of mind. purely Value investors will also search for just the value of who they are good products, whether in a dinner out, in the supermarket to buy all kinds of goods, or in the automobile market in the selection of new cars in the city to find their own housing Loved the house, etc., they are willing to pay over the price. So, how to distinguish the value of investments and non-value-based investors, the similarities and differences? We from everyday life can see the difference between the two:
Value investors will go to rent a video of 3 yuan, and will not pay a twenty dollars went to the cinema to see a similar film.
value investors will wait for Toyota or Ford cut prices only for new cars, new models and not just in the time available to catch Qucourenao. The new car will mean a lot more money to be paid.
value investors will purchase a package of paperback non-brand cereals, will not buy a box of beautifully packaged, the cereal brand is very expensive.
Value investors comes in spring to 5 discount to buy winter clothes, winter wear, etc. for the coming year, and not followed during the winter As we rushed to get into the high-priced winter clothing store.
value investors will not purchase price of a few hundred dollars stuffed than Ni, but will buy at lower prices will remain normal children had a wonderful time toys.
these consumption patterns and investment What is the relationship? there! the above example, the value of the type of consumers will always look for cheap buying opportunities, or to find cheaper alternatives. We must such acts should not be regarded as just for the sake of small cheap, on the contrary, they reflect the consumer behavior of goods are reluctant to pay more than fathom extensively and very subjective, to set a fair market price, you must buy before the judge in the value of the goods. For example, in determining the rent videos instead of going to the movies, the consumer must look set to spend 20 yuan the concept of a movie is too expensive, natural, flower tape of Binary and Ternary loan is completely acceptable. Similarly, consumers do not buy Buick 30 million price tag, but two months later when the price to drop a 2 million, the consumers will find it excellent value for money. In fact, the above example has in common, that is cheap to buy good merchandise, or buying a homogeneous alternative to grab than high into the same things to be much more cost-effective. commodity markets is the case, the stock market in the capital the same way.
2, the stock market is an inefficient market. the stock market is probably the world's only other commodity markets and other place, sometimes it is the only let investors buy more expensive than the reasonable value of things. investors from other investors looking for investment behavior to determine a sense of convergence to buy all the stock, they are taught in a take a good stock or the stock market when the technical buying stocks, that is, those who buy a new high closing price, volume amplification, or break the stock moving average. the stock market price to induce investors to measure the company uses only the market value of For most investors, the share price represents the intrinsic value of good company; the other hand, fell, said the company's intrinsic value is worse. Clearly, the stock market is the formation of investors place of these misconceptions.
Nevertheless, many investors people believe that the stock market will not be like the past as irrational Persian spice market, the stock market is rational, stock prices are efficient. associated with this theory is that tens of millions of people worldwide are studying the stock market, so Shares will not be higher or lower than its true value, because if this occurs, investors will soon find that during the spread, and to push the stock back to a reasonable price point.
efficient market theory has its own advantages. to conduct transactions, the stock market, the exchange itself is a fairly efficient mechanism. Investors can always pick up the phone, offer to buy shares of their choice, irrespective of the scale of investment up to 10 people billion fund, or a few thousand dollars, a few million small investors, such as school teachers, retirees, etc., anyone can participate in market transactions at any time. But the so-called efficiency than that. In the vast majority time, the stock market is neither unusual nor rational, but not no fair at all. On the contrary, the stock market reflects investors tens of millions of random behavior, in order to achieve their personal goals and make a variety of profit buying or selling decision.
Graham believes that the market price is set by supply and demand psychological: but it involves the psychological level, because these processes are run through the minds of investors. So, the market is a group of people wrong or a group of individual errors, most errors can be attributed to three basic reasons: exaggerated, over-simplification, neglect . oil stocks, because he thinks the stock has almost bottomed out and the prices very reasonable, he can reach a deal because someone persuaded by his agent, sold 100 shares of the stock. Exxon Mobil stock In the next buyer broker's account for extra cash and want to earn more dividends, and its counterparties are good at technical analysis, market veteran, the computer showed that he's Exxon oil stocks overbought. under a transaction is a father, he must sell 500 shares to pay for his daughter's wedding. the buyer is a widow, she had just read in the papers the news about Exxon Mobil, this one left a deep stock impression, so the orders to buy 500 shares. 5,000 shares under the pay deal, a small business owner is to his employees retirement savings plans to diversify investment risk, the counterparty is to have 6 million Exxon Mobil stock mutual funds, are now trying to hand part of the holdings in the energy sector to reduce the risk.
situation from the above transactions, the investor's gain or loss concept, objectives, limitations, news channels, and interpretation of events to as each person's fingerprints are not the same. their business hours in the day for different transactions. In fact, Exxon Mobil shares traded that day only 5% of those people are analyzed the prospects of the company and assessed the actual value of the company's shares, the remaining 95% of people are in varying degrees, the use of information as a basis for their decision-making. This is not efficiency, is a volatile the stock price to the emotional ups and downs allowed to manipulate the market behavior. in the daily transactions, supply and demand can indeed drive prices, but supply and demand by each investor is unique psychological power-driven, and information is just an excuse for people to order nothing more.
In the worst cases, the open outcry system will cause the overall confusion, panic and the real price inefficiencies. Our St. Louis from a well in the U.S. pipeline company, Maverick Tube Manufacturing Stock happened in 1997 can be seen. Maverick Tube the concept of stock within 9 months from 6 yuan to 50 yuan, and then fell back in 1998 and the price of 10 dollars per share. The company's share price skyrocketing, the company's profits and net worth are not the same as its share price increased by 9 times. This volatility is reasonable, rational you? Maverick Tube Corporation in January Shihai only 6 dollars per share, to September when 50 U.S. dollars to the historical high price, nearly 7 months after their colors. Maverick Tube in a fair market value of fluctuations in prices are reasonable, but the shock is so great that can be said to be reasonable and rational? If the investing public can take a rational assessment of Maverick Tube stock price, its stock price per share may be from $ 5 slowly rose to 25 dollars, remain at this level until the second year. However, because the market's greed, panic, irrational, and the uncertain outlook for the company and allows the company's stock price in just year experienced the thrill of jumping over the mountains.
Is the market inefficiencies occurred in the 1997 Maverick Tube Corporation, a body do? 1995 to 1996, the General Electric (General Electric) is really the inherent value of as the share price increased by 150% as? from the stock to see true, but this reasonable? only believers in the efficient market theory only willing to believe. During that time, GE's earnings rose 32%, and increased equity 38%, the stock is rising value of the company to increase speed of 4 times the speed.
the most famous case occurred in October 19, 1987, the day the U.S. stock market plunged by 22%, stock prices do to show you the efficiency of the ? whether the intrinsic value of U.S. companies as it did in the stock market has demonstrated it, in just 6 hours plummeted so much value. In fact, the tragic occurrence in the stock market that day, no big business and industry happens, the normal operation of the economy, the customer is still happy to shop retail stores, production line workers continue to be the normal speed in the production of products. And the day was the only change is the investor's point of view, people that share prices have been high Debu reasonable the.
3, the error message Interpretation of the market. There is no doubt that most of the show in front of the information investors are being seriously tampered with, so the stock price distorting effects of very large. because most investors According to the information contained in such transactions as the subjective interpretation, so that investors misinterpreted the information. Here we propose three assumptions to further illustrate our point:
information is not readily available. due to cost reasons, most investor is unable to obtain sufficient information. Even in the era of information explosion today, millions of investors made through the network Although the past can be controlled, filtered information, but still can not get in the short term may affect the stock price information. Investors can not regularly visit the listed companies, not with the guild, suppliers, distributors conversation, let alone participate in enterprise management. is the second year of a shareholder meeting can be said that most of the participation of small shareholders are missed.
each person's understanding of the information is not the same, investors are often subjective interpretation of information. previous example of Exxon Mobil stock on the description of each of the Investors are based on your financial needs, goals, constraints, News pipelines and understanding of the incident for stock trading. For the average investor, usually an shares rose to 25 yuan to 25 yuan than the stock fell more worth buying.
investor information is usually about information from the intent of people, such as market analysts, listed companies rose's false, at least with the message water. In establishing investment ideas and make investment decisions, we must not underestimate the media and press events role. all the news released from the financial industry, and the filtered information, stock prices are likely to become inefficient. For example, poor governance structure of listed companies of information commonly used method of distorted to confuse investors, they published estimates profit, distribute news and other merger restructuring to achieve their purpose ship pulled.
media to win subscribers, and is often ordered news reporters fabricated, for example, clearly jumped over, they also reported that the so-called hot stock substantially , or a large number of writing such as . Even the tone of the article used, sometimes to a serious distortion of information. misleading title or inflammatory language, may undermine the stock of normal supply and demand.
used to buying and selling stocks based on the information investors who are particularly vulnerable to information Reading about bias. For example, January 22, 1997, when the major media have tried to interpret the U.S. Federal Reserve Board Chairman Alan Greenspan's speech on the Senate Budget Committee. The next day the news reports indicate that U.S. inflation may rise, may also be flat; economy may be steady growth, there may be risk of overheating. Consider the following five reports address current headlines Greenspan:
U.S. economic growth rate of satisfaction, and issued a warning. can only be based on the same day you see a news report to be read. If you pick up the morning newspaper to see the headlines read, sold in the opening day of the hands holding the stock is sensitive to interest rates. But if the newspaper reported that use of the same news, You may be in the stock market does not do anything, because the news is neutral or even slightly good news side.
when the January 22, 1997 news in front of you, at least, have been filtered out more than four times. First of all, the reporter will interpret Greenspan's speech and his speech according to their own readers to understand condensed into a few easy points, focus; then, journalists must also be under the old format after the speech, members of the Senate to exchange views when talking about the view. If there is no Mr interest rates question him, the reporter might think that this topic is not much news value, and thus lightly in passing. Then, the reporter may seek professional advice, due to deadline pressure, He may not have time to interview and listen to various experts of different views. Finally, the presentation will be at the editorial meeting, one at a time, news editors and text editors based on their understanding of the importance of Greenspan's speech to re-schedule presentation They usually clerical-type pick from the presentation
news headlines (usually six words or less) to summarize the content of Greenspan's speech.
that the results of an information processing plant, it could seriously distort investment investment in those ideas, leading investors to make irrational decisions. So, do not believe that people who value investing theory, efficient market theory only believe that the share price earnings ratio is still 50 times the fair market value, and the market will not be defeated. As for the value-investor, as long as they are still insignificant minority groups, then this error from the above logic there will be many opportunities for profit. your biggest source of profit, that is, abandon the concept of the traditional investment , carefully check your information and wait for investors to misjudge the company price. cited Graham as saying: errors. very emotional and not logical way of thinking decisions. So when we discuss the stock market, the human mind as an important variable to consider factors that are particularly important. because the more uncertainty and instability in the market environment, investment people have been tangible and intangible psychological factors will be greater. We found many factors that induce people to buy and sell stocks, except only from human beings, including social behavior, including psychological perspective to explain, and no other point of view can be explained.
stock market investors by the sale of numerous acts of will and force formed by the results of the decision, so we can safely do to make inferences, the stock market up or down the main driving force comes from the psychological impact of investor . Graham believes that investors face if you want to establish a correct attitude toward the stock market, it must be psychologically and financially well prepared, because the market is inevitable at the next shock, investors in the stock prices rise only when have a good psychological quality, but also to calm the mood to face the fall in stock prices, sometimes even violent situation down. Meanwhile, investors on the stock market reaction to falling prices as the company boss encounter should question the price is too individual customers the psychological high as to totally ignore the existence of a thing. If you have that mentality, you already have 99% of the leading psychological quality of other investors: and easily sell their favorite stocks, it will not care about short-term price movements. others who see the miniature. He believed that his success relies on research rather than luck, the decision-making from his own careful thought, and from short-term events are not easily and emotional withdrawal from the market. He understood the nature of risk and confidence to accept the results of the market. So as an investor, like Warren Buffett would like to pay special attention to the mood changes, when your instincts want you to make rational investment behavior and the behavior of the opposite, you have to do proper reflection, and then make a choice.
5, the market is not effectively predict. any long-term observation of people know Buffett predicted the stock market for the view that he is not a waste of time. whether for overall economic development, market market trend, or volatility of individual stock prices, Buffett felt strongly that investment does not predict the future has no value. riba Buffett over the past 40 years has created enormous wealth and the impressive investment performance, which all rely on substantial investment in a few blue chip stocks on the results of the investment strategy. Buffett's many loyal followers adhere to predict the future direction of the market does not have any meaning, they can not stock market, your portfolio.
And in the same time, investors have never focused on the general subject of the analysis of company fundamentals, they frantically chase the stock market trend forecast. Jiabo Li has pointed out sharply that the trajectory of history to see , it is always easy to predict the future by some called the Prophet, fascinated by the concept or system. as long as the number of fortune tellers, sorcerers, prophets market, economists and so casually say something audience.
Although the future is unpredictable, but one thing is for sure, and that is the subject of good company will eventually invest in the stock price reflects its value, from a layer of sense, and only from this sense, the future is predictable. However, we can not know the value of this investment will have to wait until when reflected. We only know that all of the stock price will fluctuate, but can not predict in the end one of these stocks in the future fluctuations in a volatile up or down. from Buffett's investment strategy, we can realize that, in fact, investors do not need to indulge in short-term trend of the stock will be meaningless in predicting how important is whether the investor has invested in a good on the subject company. Thus, the final will be sure to benefit the right investment.
6, learning to use the composite method of conditioning on investment analysis. Buffett Graham School has trying to use an interdisciplinary approach to explain our lives around the relationship between environment and investment. at Columbia University, Professor Mo Buxun offer not only basic financial analysis model, also studied many models in other areas, he hoped that interdisciplinary students knowledge and methods can be used in investment, he explained: investment circles did not play any important role, but now technology has become a very important part. Thus, Professor Mo Buxun want to model the hearts of every person to adapt to the rapid development of both the external world. He said: Tell me, is to understand the complex control system of a capital market approach is useful, as long as more and more people understand the complex regulation system, investment professionals will be more understanding of the true state of operation of the market. system is to tell the investors, the market is always changing and is often starts acting strangely. Legg. Mason's Bill. Miller said: can predict future market trends, and analysis of the market is the right investment mentality. environment, and we invest in people to study is to identify the composition of these elements within the system operational status and the media to help this experience we give up the rigid model is too simple to more innovative way to understand the actual market is a very complex system. different characteristics, today's U.S. stock market is no longer the era of the 20th century, the market was .1964 60 years, technology stocks accounted for only the proportion of the overall S & P 500 stock index about 5.5%, while stocks of raw materials accounted for 16.5%. Now the proportion of these two types of stocks is almost completely reversed, with the only index of stocks of raw materials accounted for about 6.9%, while the tech sector accounts for about 12%, and this share is increasing. There are many other different places, such as the 20th century, 60 years, public utilities stocks and oil stocks accounted for about 37% of index weighting, and now these two types of shares only 19%. had less buzz financial and pharmaceutical stocks, and now accounts for the entire index component Share the proportion of about one-quarter of the strong.
Miller said: because they do not notice these subtle changes is emerging from quantitative to qualitative changes in the process. or not, they all, without exception, living in a world of change at any time, this changing world is like a kaleidoscope, as in appearance looks similar, but the change order was never the same, because each mode is new different. So, how should investors in a lack of cognitive model of the world to survive? It is to find the right level and direction. Although the economy or the market itself is complex and elusive, investors can distinguish between the different types of corporate level, different and has its own internal management and financial models and so on. If investors can study these patterns, you can master the future development of the company's prospects.
This is exactly Buffett attention to the kind of model, rather than the tens of thousands of investors keen on the kind of unpredictable behavior of speculative markets. Buffett said: quite different before the big change, we should not attempt to predict these changes and attempted to make a profit. If we focus on as we explore the past has always been a good investment company, the external changes will not be on our long-term investment in any adverse impact . aghast at the side of the volatility of the time, remember Warren Buffett's words: market uncertainty will be the value-oriented investors do not invest in a good friend is missing. ) is actually very simple, but we were puzzled that few people are willing to use it. or why people should refuse to accept has been proven time and again is a very successful investment strategies and ideas. on this issue, only Thomas. Kuhn (Thomas Kuhn) is the most qualified to answer.
Kuhn died in 1996, during his lifetime was the famous physicist and philosopher. Kuhn in 1962 book Scientific Revolution) was considered the latter half of the 20th century the most influential one of the classic philosophical works. This book is very popular, sold more than a million copies in many European and American universities in social science courses will focus on books as to read. The book introduces the The process is a new invention known as Qizhuanyiyang added to the invention above. But Kuhn said that scientific inventions are sometimes generated by the crisis, and only when the crisis comes, the scientific inventions were able to be social to governance crisis was recognized. Therefore, in building a new science, the first step is to mainstream thinking was completely removed and the model.
the evolution of history seems consistent with Kuhn's theory. Copernican theory was overturned by the views of the Earth as the center of the universe, Einstein's theory of relativity to Oujimide geometry paled. Kuhn that can be seen from these examples, each paradigm is usually experienced before the full transfer crisis era. Some people think that now debating a wide range of diversified investment portfolio and the value of the investment portfolio in the end one is better, it is ready to transfer the concept of Kuhn that moment of crisis. Kuhn continued to express that, at the paradigm shift, before We will first see some unusual things there. Buffett said: academics prefer to exclude these new things and theories, rather than admit them. Start embellished the facts in an attempt to smooth things over for the Ptolemaic theory, they believed that Ptolemy right, but his theory requires some amendments to it. Kuhn said: other methods, but they still do not give up before them into the new model has now had the old model. Now to immediately accept the paradigm shift, indeed, whether from a mental, emotional and financial terms, will be a costly risk.
occurred in the history of the paradigm shift and change of events, often take several years, the number of decades or even several generations to complete such a lengthy process, because the need to have sufficient time to educate and win new supporters. When the old model have determined do not meet the requirements of the new era, the new model was able inroads into people's daily life. the paradigm shift before the completion of a new paradigm of the biggest challenges the creators and supporters are in a hostile world persevered. to be able to survive in a paradigm shift is the need to go beyond the spirit and resistance of ordinary people have a firm belief. Buffett value investing school masters are in the past few decades, the practice was honed through personal characteristics such that, only a world-renowned investment performance today. Their This shift in the paradigm have shown great character, are not worth studying today's investors do?
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