The Intelligent Investor
Well I will dedicate another post to our No.1 richest man in the world, Warren Buffett.
I was reading on CNBC's post about Buffett and he brought up a book that I read years ago - The Intelligent Investor. So I decided to look for it and found the pdf format of the book online
Click Here
Honestly speaking you will be freaking bored by the book. I doze off many times while reading it. But Warren Buffett spares us the trouble of reading the whole book.
Warren Buffett: The three most important lessons I learned were all from the same book, The Intelligent Investor. It was written first by (Benjamin) Graham in 1949. They appear in chapters 8 and chapters 20.
"The first is, to look at stocks as pieces of businesses, not as little items on a chart that move around, not as ticker symbols, not as something that might split next week or next month or something of the sort. But, rather, to look at the business, value the business, divide by the shares outstanding, and decide whether you really want to own a piece of that business at that price."
"The second one was his commentary about your attitude toward the stock market. That it is there to serve you rather than to instruct you, and he used the famous Mr. Market example of that. That attitude is fundamental to making money in stocks over time."
"And the final item he talked about was margin of safety. When you buy a stock that you think is worth 10 dollars, you don't pay $9.95 for it, because you can't be that precise in estimating its value. So you leave a considerable margin of safety for both what you don't understand and for the vagueries of the future."
"And those three ideas, which I learned when I was 19 years old, have been the bedrock of everything I've done since."
Mr. Market is a imaginary character that Graham uses. He controls the whole market so to speak and goes to a business owner and quotes a value for the owner everyday. By right, he will give him an accurate price so that no one is on the losing end. However he has PMS (I cant stop laughing when I say this but yeah), so at times he will give u a very lousy quote for a business but when he is feeling happy, he will quote u a good and high price. So ideally speaking, your job as a business owner is too buy at a low price from him and sell at a high price. Sounds easy? Well, Mr. Market is not that stupid either, sometimes he will give u some false signals that make you think that you are buying at a good price. He is a very cunning man.
So as a true intelligent investor, you are free to ignore the quotes he gives and you are certainly not forced to sell whatever you have. If you are worried by the quotes that he gives then you have turned into a trader unwillingly. Actually this sounds like Jesse Livermore, just that both of them represent different camps. Great minds think alike.
Graham does not conclude from Mr Market’s wild behaviour that market fluctuations should be ignored. They can be valuable as an indicator that something is going wrong, or right, with the investment. However, their true significance, in Graham’s words is that "they provide … an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal".
Warren Buffett considers that Graham’s views on market fluctuations warrant "special attention" from the investor.
Nice and short, don't wish to make it too long though. Hopefully I have covered enough.Quick Update
Well US had a long weekend on monday and resumed trading on tuesday with a modest gain. AMR wasn't doing great because oil was down to $130. Oil slipped even further to $126 as I was writing this blog. Maybe that MF Global guy is really a somebody. I will not dispute his foresight but I definitely can't see it coming last week. We have two more days to go. Hopefully I am right. When oil is not going up, I am pretty much screwed in every ways.
Two more days to go before tradershub challenge ends. I need ManhattanRes to break. It was not going my for the past three days.
I shall end off with one chunk of words from Jesse Livermore =D
"And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine - that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance."
Jesse Livermore
1 comment:
The markets headed for more declines.
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