Weekend brain food IX

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It's been a while since I have posted weekend brain food. I have been quite out of touch with investment theories and research as I was pretty caught up with work, sports and events. 

This is an old draft... very old yes. My thoughts part is recent.


Benjamin Graham vs. Jesse Livermore - by A Wealth of Commonsense


"In chapter 8, Graham introduces the story of Mr. Market as a way to illustrate the manic behavior of investors in the short-term. Chapter 20 covers the idea of margin of safety as a way to better understand risk management.

Both chapters still hold up to this day despite the fact that the book was originally published in 1949."

"You can still learn from legendary investors and traders. Market history can still help give you insights into potential risks.

But markets change. Investors adapt. Rules are updated. Advantages slowly get arbitraged away. Strategies that outperformed in the past don’t work as well in the future once everyone knows about them.

This is true for normal investors and legends alike."

Some thoughts...


Most money are made during the "rule-less" period and when majority were still "clueless". 

As more and more people join the game, opportunities get arbitraged away faster as what the author mentioned. Modern market manipulation, in obscure and legal ways, is possible. With AI in the future scene, market might be moved faster than we can imagine. Thus, it may be difficult for some of these assets to maintain their so-called "fair values" or be expected to "revert to mean" as volatility rises. 

If something is deemed with high potential and popular enough, it can be quickly become over-valued. Not withstanding the possibility of "pump and dump". Investors can no longer rely simply on old theories and analyzes without keeping up with latest channels and resources. There is a need to look out for what others are doing and follow the smart money or risk being left in the dust.

Did you catch the AI stock pump? (Is an AI Stock Market Bubble Inevitable?)


Final quote from the article:
"Everyone on Wall Street is so smart that their brilliance offsets each other. And that whatever they know is already reflected in the level of stock prices, pretty much. Consequently, what happens in the future represents what they don’t know."
 

Thanks for reading!

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