STOCK MARKET GENIUS
“If all men were geniuses, there would be no genius.” Dickson G Watts
“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” Bill Gates
“One lucky break, or one supremely shrewd decision—can we tell them apart?—may count for more than a lifetime of journeyman efforts.” Ben Graham
"People often assume when a decision is followed by a good outcome, the decision was good, which isn't always true, and can be dangerous if it blinds us to flaws in our thinking." Philip Tetlock
“In a necessarily uncertain world, a good decision doesn’t necessarily lead to a good outcome, and a good outcome doesn’t necessarily imply a good decision or a capable decision maker.” John Kay
“I sometimes think that no price is too high for a speculator to pay to learn that which will keep him from getting the swelled head. A great many smashes by brilliant men can be traced directly to the swelled head – an expensive disease everywhere to everybody, but particularly in Wall Street.” Jesse Livermore
“It doesn’t take much to convince us that we are smart and healthy, but it takes a lot of facts to convince us of the opposite.” Dan Gilbert
“Never confuse genius with luck and a bull market.” John C Bogle
“If you don’t recognize luck when it happens to you can fool yourself into thinking past performance was indicative of skill in a way that leads you to regrettable decisions.” Morgan Housel
“The greatest trick the market plays on beginners is making you think luck is skill. It waits for you to double or triple down on your next bet and then it teaches you your first lesson.” Ian Cassel
“Luck is definitely a super-power in investing and you need to be honest enough to acknowledge its presence.” Munib Islam
"Making money through an early lucky trade is the worst way to win. The bad habits that it reinforces will lead to a lifetime of losses." Naval Ravikant
"During 'bull' markets, many investors tend to give themselves too much credit for favourable results and to give insufficient credit to the positive environment that played a large role in creating the results. This can lead to overconfidence on the part of the investor and resulting mis-assessment of risks." Ed Wachenheim
"Just because you made money doesn’t mean you were right, and just because you lost money doesn’t mean you were wrong. It is all a matter of probabilities. If you take a bet that has an 80% probability of winning and you lose, it doesn’t mean it was a wrong choice.” Tom Claugus
"Every once in a while, someone makes a risky bet on an improbable or uncertain outcome and ends up looking like a genius. But we should recognise that it happened because of luck and boldness, not skill." Howard Marks
“The market is pretty efficient at grinding down the egos of those who succumb to the temptation of seeing profits as certification of their own genius.” Leon Levy
“The absence of loss does not necessarily mean the portfolio was safely constructed. So, risk control can be present in good times, but it isn’t observable because it’s not tested. Ergo, there are no awards. Only a skilled and sophisticated observer can look at a portfolio in good times and divine whether it is a low-risk portfolio or a high-risk portfolio.” Howard Marks
“Alpha is a profit that doesn’t come from the whole market going up or down. Anyone can get lucky and make big money taking a big risk. Alpha is different. It’s return you get beyond the risk you take.” Chris Macnguyen
“The correctness of a decision can’t be judged from the outcome. Nevertheless, that's how people assess it. A good decision is one that’s optimal at the time it’s made, when the future is by definition unknown. Thus, correct decisions are often unsuccessful, and vice versa.” Howard Marks
“Any asset class or strategy can have its moment in the sun, yet as time passes we learn what risks were employed to achieve those periods of outperformance.” Christopher Begg
"It is all about believing in yourself and not confusing a bull market with brilliance and a bear market with stupidity.. markets are markets. You can't take it personally." Mark Kingdon
“It is not a good idea from the standpoint of preserving and growing private capital over long periods of time to assume, after events transpire, that what actually happened is the only way things could have worked out.” Paul Singer
“Just because you did something that worked doesn’t mean that it wasn’t risky or wasn’t smart.” David Abrams
"Numbers can be very misleading because very smart people can struggle and very mediocre people can excel for periods of time." Jim Chanos
"The mere fact an aggressive strategy wins in a winning period doesn't prove it's the right strategy for all periods." Howard Marks
"Just because you buy a stock and it goes up does not mean you are right. Just because you buy a stock and it goes down does not mean you are wrong." Peter Lynch
“One thing about investing is, I think it’s good not to think that one is a genius, because the stock market will bury you.” Jean Marie Eveillard
“It’s dangerous to think you know too much and have your ego all involved in showing how smart you are and all that. It’s not an accident we use all of this self-deprecatory humour at Berkshire. It’s required for sanity. It really is.” Charlie Munger
"When you are having a good run of it, you are not as smart as you think you are, and when you are struggling with it, you are typically not as dumb as you look." John Harris
"Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do you are dead. If you make a good trade, don't think it is because you have some uncanny foresight. Always maintain your sense of confidence, but keep it in check." Paul Tudor Jones
“Ego is the enemy of investing.” Jake Rosser
“When someone is doing well their portfolio should be subject to extra scrutiny and their ego deflated. When they are doing poorly they need to feel supported and have their ego boosted.” Paul Marshall
“Anytime that you think you’ve become a financial genius – when, in fact, you simply have had good luck to turn a profit – it is time to sit back and do nothing for a while. If you stumble upon success in a bull market and decide that you are gifted, stop right there. Investing at that point is dangerous, because you are starting to think like everybody else. Wait until the mob psychology that is influencing you subsides.” Jim Rogers
“I have seen a lot of people who confuse money with brains and more than a few traders who develop an unbounded view of their own infallibility … and usually such hubris precedes some sort of market retribution. I am sure that most of us in this room have seen that biblical injunction of pride coming before the fall strike someone near us in the trading world — if not hit us directly between the eyes.” Bruce Kovner
“Success tends to breed confidence and then, eventually, overconfidence — and why would one examine what he’s doing when it’s so successful, even if it’s silly!” David Polen
"Any investor can chalk up large returns when stocks soar .... In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm thinking its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond." Warren Buffett
"Good decision-making can lead to bad outcomes and vice versa. If we believe that we predicted the past better than we did, we may also believe that we can predict the future better than we can." Peter Bevelin
"The riskiest thing is getting lucky - a false positive. You have a positive result, but your process was poor. That's the most dangerous because, after a few false positives, you typically go bigger, and that leads to the old saying of "succeed small, fail big.” So we think about this pretty carefully." Ken Shubin Stein
"We have talked about how a sound investment process likely leads to a good investment result. A good result, though, says nothing about whether the process involved was a good one, and, thus, whether or not the success might be replicable." Seth Klarman
"In a bad year, defensive investors lose less than aggressive investors. Did they add value? Not necessarily. In a good year, aggressive investors make more than defensive investors. Did they do a better job? Few people would say yes without further investigation. A single year says almost nothing about skill, especially when the results would be expected on the basis of the investor's style." Howard Marks
“Short-term performance is an imposter." Howard Marks
“Track records can tell you something, but you need a really long history of outperformance to have even a moderate belief. They’re just noisy.” Alex Magaro
“Short term performance of skill is an imperfect indicator of skill at best” James Surowiecki
"One of the allures of this business is that sometimes the greatest ignoramus can do well. That is unfortunate because it creates the impression that you don't necessarily need any professionalism to do well, and that is a great trap." Michael Steinhardt
“Return alone—and especially return over short periods of time—says very little about the quality of investment decisions.” Howard Marks
“A year is far too short a period to form any kind of an opinion as to investment performance, and measurements based on six months become even more unreliable. One factor that has caused some reluctance on my part to write semi-annual letters is the fear that partners may begin to think in terms of short-term performance which can be most misleading. My own thinking is much more geared to five year performance, preferably with tests of relative results in both strong and weak markets.” Warren Buffett 1960 Partnership letter
"Short-term performance measurements are meaningless, and it is impossible to forecast with any certainty what the relative performance of a manager will be in any given year. In fact, even a several-year span can be misleading, as a manager may be able to achieve above-average results by owning very high-risk stocks in a generally rising market (as we had in the 1960s) but be virtually wiped out in the same class of stocks in a bear market. The only true test of a money manager's ability is if he can obtain above-average results over a full cycle that includes both bull and bear markets. A great investment manager must be ‘a man for all seasons’." Barton Biggs
“When you are looking at any manager and you’re trying to decide how they’ve done and how they are likely to do in the future, always give the most weight to the long term track record and how it was achieved.” Mohnish Pabrai
"It can take years to judge the quality of an investment decision. Those who believe that they are quite witty because of a few years of strong performance – for a stock or for the whole portfolio – should develop a strong auto-scepticism reflex." Francois Rochon
“If I had to choose a great single fallacy of investing, it’s that when a stock’s price goes up, you’ve made a good investment. People take comfort when their purchase at $5 goes to $6, as if that proves the wisdom of the purchase. Nothing could be further from the truth.” Peter Lynch
“One reason the financial industry mints so many extraordinary egos is because it’s easy to take personal credit for what works and claim to be a victim of what doesn’t. Industrial engineers can’t simply be in the right place at the right time, or blame their failures on the Federal Reserve. But investors can, and do. An iron rule of investing is that almost nothing is certain and the best we can do is put the odds of success in our favor. Since we’re working with odds – not certainties – it’s possible to make good decisions that don’t work, bad decisions that work beautifully, and random decisions that may go either way. Few industries are like that, so it’s easy to ignore. But it’s a central feature of markets. Unless you’ve enjoyed a period of success that you realize you had nothing to do with, or can admit that a long period of loss was due to your own mistake, you’ll have a hard time grasping reality in a way that lets you do at least the average thing when everyone else is losing their minds.” Morgan Housel
“The stock market provides an uneven feedback loop for investment decisions. This unusual economic microcosm may sometimes reward poor decisions and often penalises good ones… When a blackjack player receives a 3 after he hits on 18, he may celebrate a victory, but clearly the decision to hit was incorrect, based on all available information at the time. Good portfolio managers have this concept ingrained in their thinking They realise positive outcomes are sometimes confirmation of a good decision, and sometimes they are not. What matters is process.” Brian Bares