In my last musing, I discussed the notion of a great contrarian indicator; magazine cover-page stories. Keeping with this theme, I ran across this article that seems very applicable today, about, arguably, the best contrarian of all time.
“It is sometimes said that to be an intelligent investor, you must be unemotional. That isn’t true; instead, you should be inversely emotional. You can’t turn off your feelings, of course. But you can, and should, turn them inside out.
Mr. Graham worked diligently to resist being swept up in the mood swings of ‘Mr. Market’ - his metaphor for the collective mind of investors, euphoric when stocks go up and miserable when they go down.
He almost invariably read the enthusiasm of others as a yellow caution light, and he took their misery as a sign of hope.
His knack for inverting emotions helped him see when markets had run to extremes. In late 1945, as the market was rising 36%, he warned investors to cut back on stocks; the next year, the market fell 8%. As stocks took off in 1958-59, Mr. Graham was again pessimistic; years of jagged returns followed. In late 1971, he counseled caution, just before the worst bear market in decades hit.”
Who is Ben Graham? The author of The Intelligent Investor. Warren Buffet was the Protégé of Mr. Graham.
Source: Jason Zweig, The Wall Street Journal, May 26, 2009.
Saverio Manzo
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