Something that knocks the pins out from our normal understanding of price earnings ratios, return on invested capital, discounted cash flow analysis, smart beta/factor ETFs, value at risk models (VAR) and even company financial statements
Mathematical models that show price correlation will give precise answers but aren’t useful
But I am not building up a baseball bullpen of game-ready companies
It’s amazing that 2% makes such a big difference
The concerns which fail are those which have scattered their capital, which means that they have scattered their brains also. They have investments in this, or that, or the other, here, there and everywhere
Can we improve on the accuracy of these estimates by obtaining estimates from, say, 22 leading investment banks and averaging them?
On this basis it could be argued that, at that time, since expected returns were well below historic norms, prices were too high.
Too much of a good thing can be wonderful
So we search for those things that other people are selling and then if the problem or adverse outlook is temporary we buy them and hold them patiently for years until the public changes its mind.
A group with a high anchor were prepared to pay three times as much for the same wine as a group with a low anchor
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