None of this is new news, this is exactly what <i>The Intelligent Investor</i> and <i>Margin of Safety</i> are based on: that the market <i>is</i> irrational.<p>To go further, this is what Warren Buffett made his first few millions off of what is considered "cigar butt" investing. These are stocks trading below their Net Current Asset Value (NCAV). That means take all of their cash, real estate, equipment... those are your net current assets. Now take a subset of those stocks, and you find some at such steep discounts that they are trading <i>below the cash they are holding</i>. How is that possibly rational?<p>To put that in perspective with a contrived example would be Apple, currently trading at $153 with a market cap of nearly $800B, $250B of that is in cash. Now imagine Apple is trading at $45 a share. That would value Apple at $235B...but if they liquidated the company, they would have <i>more</i> than that in the cash alone! And that is exactly the kinds of companies that folks like Ben Graham and Warren Buffett invested in, because they were so cheap, and probably not even great businesses, but had "one less puff" (hence cigar butt) in them before they closed up shop, were acquired, etc.<p>Now, one retort might be that these guys were investing in two of the worst markets in the history of the US economy - Ben Graham came out of the Great Depression and Warren Buffett from the bear market of 61-62. But there are still examples of this today. Seth Klarman's fund (which still exists today) has only had 3 down years and is considered to be one of the greatest investors since Buffett. These investments still exist, and it's all based on buying cheap when the market has irrationally priced them at a sale.
I think this is silly gobbledygook. The author seems to argue that you pull out of stocks when expected volatility rises. Well expected volatility can be a trailing indicator. The market has low volatility because investors expect great times, yet it suddenly crashes and loses 20%, and volatility skyrockets because investors basically believe that patterns continue forever and expect the market to continue to fall.<p>So now you sell, at 20% below peak prices. Maybe prices continue to fall, maybe not, but it's unlikely expected volatility will fall until the market starts climbing again significantly, say 20%. So then you buy back in, well above the lows.<p>Essentially this seems like a sell low, buy high mechanism, sell on dips, and buy on spikes.<p>Value investing means you invest in only what you can reasonably estimate a value for. You buy when the price is substantially less than it's value. You sell when value and price are similar.<p>Selling a stock you though was worth $10 and bought at $7, because it goes to $6 doesn't make sense if you believe in your original valuation. Buying it back because it goes to $9 doesn't make sense either.<p>If you cannot confidently assess value, you shouldn't be doing anything but buying and holding index funds.
The last chapter, to me, was the most interesting, and I would have liked it if author had expanded on this:<p>"If we need 100,000 people to cure cancer, to deal with Alzheimer’s, to figure out fusion energy and climate change…I don’t know of any other way to do that other than financial markets: equity, debt, proper financing and proper payout of returns. I think that in many cases [finance] probably is the gating factor"<p>How do you attribute finance as an organising/motivating factor to solve some of these problems? Energy, and patented medicine, yes I can see that - but pollution and climate change?
<i>"The Egyptians built some beautiful pyramids, but they did that with hundreds of thousands of slaves over decades."</i><p>This is now actually disproved. Made me doubt quite a bit about if the rest of the article (and his book) is actually based on any evidence or just the author's personal views.