Quote of the Day: Inherent Dangers In The Current Setup

The following, by Howard Marx, speaks resoundingly to our assessment of — and the dangers inherent in — the present market environment:

“The relationship between price and value is influenced by psychology and technicals, forces that can dominate fundamentals in the short run. Extreme swings in price due to those two factors provide opportunities for big profits or big mistakes. To have it be the former rather than the latter, you must stick with the concept of value and cope with psychology and technicals.

Economies and markets cycle up and down. Whichever direction they’re going at the moment, most people come to believe that they’ll go that way forever. This thinking is a source of great danger since it poisons the markets, sends valuations to extremes, and ignites bubbles and panics that most investors find hard to resist.”

In a nutshell:

“…everything in the investing environment conspires to make investors do the wrong thing at the wrong time.”


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