Observing that the market was FREQUENTLY efficient, EMT Adherents went on to conclude incorrectly that it was ALWAYS efficient. The difference between these propositions is night and day.
Interpretation
The quote highlights the misconception that just because markets can be efficient at times, they are always efficient.
Warren Buffett points out a critical misunderstanding among adherents of the Efficient Market Theory (EMT). While it is true that markets can show efficiency in their operations and pricing, it is a mistake to assume that this efficiency is constant and universally applicable. Recognizing the difference between occasional efficiency and perpetual efficiency is crucial for investors and analysts, as it affects how they approach market dynamics and investment strategies.
In practice
This quote can be used in an investment seminar to illustrate common pitfalls in market analysis.
I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money and there will be a lot - and it's a lot - it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.
If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record? Or be thought of as the world's worst investor when you were actually the best?
Cash never makes us happy, but it's better to have the money burning a hole in Berkshire's pocket than resting comfortably in someone else's.
I think you should read everything you can. In my case, by the age of 10, I'd read every book in the Omaha public library about investing, some twice. _x000D_ You need to fill your mind with various competing thoughts and decide which make sense.
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.
Oneβs objective should be to get it right, get it quick, get it out and get it over. Your problem wonβt improve with age.
When your outgo exceeds your income, the upshot may be your downfall.
Credit cards are like snakes: Handle 'em long enough, and one will bite you.
By far the most significant event in finance during the past decade has been the extraordinary development and expansion of financial derivatives.
A single agency responsible for systemic risk would be accountable in a way that no regulator was in the run-up to the 2008 crisis. With access to all necessary information to monitor the markets, this regulator would have a better chance of identifying and limiting the impact of future speculative bubbles.
When growth is slower-than-expected, stocks go down. When inflation is higher-than-expected, bonds go down. When inflation is lower-than-expected, bonds go up.
Any bull market covers a multitude of sins, so there may be all sorts of problems with the current system that we won't see until the bear market comes.
Subscribe for the occasional hand-picked quote. No noise.