The most common cause of low prices is pessimism - some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.
Interpretation
Pessimism often leads to lower prices, which can create buying opportunities for rational investors.
Warren Buffett's quote emphasizes that a prevailing sense of pessimism in the market can lead to lower prices for stocks and other investments, which may be beneficial for insightful buyers who are looking for value. Rather than shying away from pessimistic environments, rational investors can see these circumstances as openings to purchase undervalued assets, as it is optimism that may lead to overvalued investments, negating rational decision-making.
In practice
This quote can be used in a financial seminar to encourage investors to look for value in a down market.
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