"The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands."
"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well."
"Be fearful when others are greedy. Be greedy when others are fearful."
"Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid."
"Only 1 in 100 survived the 1929-1932 debacle if one was not bearish in 1925."
"Investment fads and misinterpretation of facts may run for several months or several years. In the long run, however, realities not only terminate them, but frequently, for a time, cause the affected stocks to go too far in the opposite direction"
"When a stock has been selling too high because of unrealistic expectations, sooner or later a growing number of stockholders grow tired of waiting."
"Doing what everyone else is doing at the moment, and therefore what you have an almost irresistible urge to do, if often the wrong thing to do at all."
"Look around, and ask yourself: Are investors optimistic or pessimistic? Do the media talking heads say the markets should be piled into or avoided? Are novel investment schemes readily accepted or dismissed out of hand? Are securities offerings and fund openings being treated as opportunities to get rich or possible pitfalls? Has the credit cycle rendered capital readily available or impossible to obtain? Are price/earnings ratios high or low in the context of history, and are yield spreads tight or generous? All of these things are important, and yet none of them entails forecasting. We can make excellent investment decisions on the basis of present observations, with no need to make guesses about the future."
"The seven scariest words in the world for the thoughtful investor – too much money chasing too few deals…"
"Economics and markets cycle up and down. Whichever direction they’re going at the moment, most people come to believe that they’ll go that way forever. This thinking is a source of great danger since it poisons the markets, sends valuations to extremes, and ignites bubbles and panics that most investors find hard to resist."
"We must strive to understand the implications of what’s going on around us. When others are recklessly confident and buying aggressively, we should be highly cautious; when others are frightened into action or panic selling, we should become aggressive."
"The desire for more, the fear of missing out, the tendency to compare against others, the influence of the crowd and the dream of the sure thing – these factors are near universal. Thus they have a profound collective impact on most investors and most markets. The result is mistakes, and those mistakes are frequent, widespread and recurring."
"3 stages of a bull market:
The first, when a few forward looking people begin to believe things will get better
The second, when most investors realize improvement is actually underway
The third, when everyone’s sure things will get better."
"3 stages of a bear market:
The first, when just a few prudent investors recognize that, despite the prevailing bullishness things wont always be rozy.
The second, when most investors recognize things are deteriorating.
The third, when everyone’s convinced things can only get worse."