Harding makes his money from exploiting the idea that markets are always rational, that they perfectly reflect all knowable information and always produce in some sense the ‘right’ price”. This theory still has a grip on western economic thinking, he says, despite much evidence that it is wrong. It treats economics like a physical science when, in fact, it is a human or social science. Humans are prone to unpredictable behaviour, to overreaction or slumbering inaction, to mania and panic.
We don’t expect to find any strong relationships between data and the price of the market. That may sound counter-intuitive but if there are strong relationships, someone else is going to be exploiting those. Weak relationships are where we have a competitive advantage.
What’s clear to the broad consensus of investors is almost always wrong the very coalescing of popular opinion behind an investment tends to eliminate its profit potential
As a general rule, it is foolish to do just what other people are doing, because there are almost sure to be too many people doing the same thing.
There’s no such thing as a good idea. Only a good idea at a price.
There is no investment idea so good that it can’t be ruined by a too-high entry price. And there are
few things that can’t be attractive investments if bought at a low-enough price.
If someone really knew, why would he share his knowledge?
Head nodders are like silver bullets: always the subject of broad,
unquestioning adoration, and thus invariably overpriced
The lesson is simple: beware sweeping statemen
ts, accepted wisdom and eternal verities,
and look for pearls others haven’t recognized.
The truth is, the herd is wrong about risk at least as often as
it is about return.
consensus that something’s too hot to handle is
almost always wrong. Usually it’s the opposite
A speculator is one who runs risks of
which he is aware and an investor is one who
runs risks of which he is unaware.
The bottom line is that what “everyone knows”
isn’t at all helpful in investing. What
everyone knows is bound to already be reflected in the price, meaning a buyer is paying for
whatever it is that ever
yone thinks they know.
“Being too far ahead of your time is
indistinguishable from being wrong.”