The good news is that we can do something. Kahneman describes risk policies as decision rules that are always applied in similar situations.
Reduce or eliminate the pain of the occasional loss by the thought that the policy that left you exposed to it will almost certainly be financially advantageous over the long run
People are rationally (?) choosing not to, as they see it, waste their time and effort in exercising their judgment about the market
In truth, Mr. Market’s emotional problems are the least part of it. What he really suffers from is behavioral biases and a propensity to make cognitive errors.
We are going to want to get a significantly higher return, obviously — in terms of cash produced relative to the amount we’re outlaying now — for a business than we are from a government bond. That has to be the yardstick at a base.
Opinions of fair value based on DCF calculations are necessarily inexact (rightly vague?). But, at least they at least ask the right question.
Since analysts’ reports are so important in our work of identifying and studying companies to invest in, we need to look at the strengths and weaknesses of these reports.
If we calculate the value of a common stock to be only slightly higher than its price, we’re not interested in buying
Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain.
Wrap up on the drawbacks of CAPE. A fair level for price earnings ratios has changed over the years.