Warren Buffett claims Chapter 12 of Keynes' The General Theory is one of the three most important chapters ever written.
John Maynard Keynes was a brilliant economist and investor.
Here's what he taught investors in Chapter 12 of his book:
John Maynard Keynes was a brilliant economist and investor.
Here's what he taught investors in Chapter 12 of his book:
1. Long-Term Expectations
Long-term expectations are based on two things:
(1) Existing Facts
The existing assets of the company, the current financial power, and the demand of customers
(2) Future Events
Changing customer taste, Corporate/management changes, etc.
Long-term expectations are based on two things:
(1) Existing Facts
The existing assets of the company, the current financial power, and the demand of customers
(2) Future Events
Changing customer taste, Corporate/management changes, etc.
2. The Structure of Markets
Constantly opened and liquid markets promote speculation.
No one would value a house every second of a day. Why do we do that with businesses?
Shareholders neglect the idea of profiting from the business. They rather profit from rising share prices.
Constantly opened and liquid markets promote speculation.
No one would value a house every second of a day. Why do we do that with businesses?
Shareholders neglect the idea of profiting from the business. They rather profit from rising share prices.
3. Investor's Psychology
Another problem for investors is human nature.
There are three main problems:
3.1 Spontaneous Optimism
Most things that we do depend on spontaneous optimism rather than a mathematical expectation.
Another problem for investors is human nature.
There are three main problems:
3.1 Spontaneous Optimism
Most things that we do depend on spontaneous optimism rather than a mathematical expectation.
3.2 Action Bias
Humans have a tendency for action rather than inaction.
In the stock market, as in many other situations, that's not a helpful trait to have.
Humans have a tendency for action rather than inaction.
In the stock market, as in many other situations, that's not a helpful trait to have.
3.3 Instant Gratification
Human nature desires quick results.
We prefer to have things today rather than tomorrow even if waiting would be rewarded.
Human nature desires quick results.
We prefer to have things today rather than tomorrow even if waiting would be rewarded.
βIf you understand chapters 8 and 20 of The Intelligent Investor and chapter 12 of The General Theory, you donβt need to read anything else."
- Warren Buffett
Here's a detailed article covering all three chapters:
danielmnke.com
- Warren Buffett
Here's a detailed article covering all three chapters:
danielmnke.com
That's it for today!
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Follow me @MnkeDaniel to learn more about Investing.
Have a great day!
If you enjoyed it, please Like and Retweet this Thread so more people can see it!
Follow me @MnkeDaniel to learn more about Investing.
Have a great day!
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