I’ve been re-reading “The Intelligent Investor” by Benjamin Graham. Warren Buffett called it “by far the best book on investing ever written” – crediting Graham with laying the foundation for his entire investment philosophy. The book taught me three powerful lessons: (1) above all else, investing is about protecting your capital; (2) investors should strive to pursue adequate and sustainable gains; and (3) it requires overcoming self-defeating behaviors (e.g., fear, greed and bias). The lessons could not be more timely given today’s excessive valuations.
"Investing Lessons"
Are Chinese Stocks ‘Investable’?
The recent rally of over 25% in Chinese was something we’ve not seen in over a decade. Beijing’s ‘stimulus blitz’ excited both institutional and retail investors alike. As context, China has struggled with deflationary pressures due to a prolonged real estate downturn and weakening domestic consumer confidence. In addition, a slew of economic data in recent months has missed expectations, raising worries the world’s second largest economy may not achieve its 5% full year growth target. The question is can the central government turn things around with more stimulus? I doubt it….
Growth Defies Fear
In my experience – growth ultimately defies fear. And whilst stocks will always climb the wall of worry – over time – growth prevails. The challenge for investors is the pathway is rarely in a straight line. Put another way, markets are constantly in a tug-of-war between opposing forces. Consider what we see today… we have a surprisingly robust US economy, defying expectations of a slowdown. Tailwinds include Fed easing, disinflation and a consumer which continues to spend. The counterforce to the further growth are escalating geopolitical tensions in the Middle East – which threaten to disrupt the global economic order
Fear & Greed
Wall St. is driven by just two emotions: fear and greed. Pending on the degree to which you succumb to these emotions – it will have a profound impact on your bottom line. All too often, most investors will do two things: (i) buy when there is market greed; and (ii) sell when there is fear. It’s the opposite of what you should do. However, this is something you need to master if you are to be successful in the game of asset speculation.
For a full list of posts from 2017…