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Changing Psychology

Co/Investor Club
Mar 26, 2023
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Investor Education: 52 Week High and Low

52-week high and 52-week low are commonly used terms in stock market analysis and refer to the highest and lowest prices that a stock has traded at in the past 52 weeks. The 52 weeks is used as a benchmark to gauge the performance of a stock over a one-year time frame.

Read our overview of 52 Week High and 52 Week Low.


Changing Psychology

“If you totally divorce economics from psychology, you’ve gone a long way toward divorcing it from reality.” —Charlie Munger

“The discipline which is most important in investing is not accounting or economics, but psychology.” —Howard Marks

Volatility continued in the stock market last week. The Fed raised rates by a quarter-percentage-point, as expected. UBS acquired, or was forced to acquire, Credit Suisse. And the week ended on worries that Deutsche Bank might be the next big European bank to have problems, even though its capital ratios seem to be in much better shape on paper. When the closing bell rang on Friday, the S&P 500 was up 1.4% on the week, and the Nasdaq gained 1.6%.

If nothing else, the last couple of weeks has shown us how quickly investor psychology can change markets. Banks that seemed fine suddenly weren’t fine. Safe, government bonds suddenly weren’t safe if those assets didn’t closely match one’s liabilities. And rumors, those pesky rumors, can cause chaos.

Highly-valued assets—supported by low interest rates or excessive fiscal and monetary policy—can become significantly less highly-valued, in a hurry, when that support reverses course. 2022 was a prime case in point.

And when psychology changes, opportunity arises for the patient and the prepared. Exaggeration and extrapolation in some areas of the market lead to good value and potential profit in other areas.

“Evidently the processes by which the securities market arrives at its appraisals are frequently illogical and erroneous. These processes, as we pointed out in our first chapter, are not automatic or mechanical but psychological, for they go on in the minds of people who buy or sell. The mistakes of the market are thus the mistakes of groups or masses of individuals. Most of them can be traced to one or more of three basic causes: exaggeration, oversimplification or neglect.” —Benjamin Graham & David Dodd (“Security Analysis”)


Tweets of the Week

Twitter avatar for @FoundersPodcast
David Senra @FoundersPodcast
I had dinner with Charlie Munger. I spent over 3 hours with him. I got to see his library. I could ask him any question I wanted. At 99 he is still *ferociously* intelligent. The most important lesson I learned from him that night was: GO FOR GREAT. In typical Charlie… https://t.co/eSbRv2S56O
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4:54 PM ∙ Mar 21, 2023
24,614Likes3,267Retweets
Twitter avatar for @ChrisBloomstran
Christopher Bloomstran @ChrisBloomstran
No no. BRK paid a mid-teens multiple for KO. Most of the shares were bought in ‘88, a second large block in ‘89 and a smaller final lot in ‘94. Shares were bought at less than half the multiple that the author suggests. By 1998 they traded for nearly 50x. static.fmgsuite.com/media/document…
Image
Twitter avatar for @mastersinvest
MastersInvest.com @mastersinvest
‘Buffett plunked down a billion dollars for a 6.3% stake in Coca-Cola in 1989-an unusual move for the midwestern investor noted for picking undervalued stocks. With its P/E ratio hovering around thirty, Coke was not cheap, but Buffett shrewdly spotted its limitless potential.’ https://t.co/3OTLrkoRzb
2:37 AM ∙ Mar 25, 2023
66Likes3Retweets
Twitter avatar for @BrianFeroldi
Brian Feroldi (🧠,📈) @BrianFeroldi
Warren Buffett. Peter Lynch. Charlie Munger. Philip Fischer. All of these super investors use checklists. I spent hours studying their criteria. Here’s the ultimate list of investing checklist questions (all yours for free):
Image
12:32 PM ∙ Mar 24, 2023
2,754Likes733Retweets
Twitter avatar for @lawhon_sam
Sam Lawhon @lawhon_sam
A thread of great sayings to help in life and trading 1. Fools try to prove that they are right. Wise men try to find when they are wrong.
8:59 PM ∙ Mar 20, 2023
530Likes97Retweets
Twitter avatar for @jtkoster
Joe Koster @jtkoster
Tickets available here…
eventbrite.comProject Punch Card Investing Conference 2023Join us for the 3rd Project Punch Card Conference in New York City, support our mission, and learn about investing in the long-term!
10:21 AM ∙ Mar 26, 2023
Twitter avatar for @ValueInvestorAc
Value Theory @ValueInvestorAc
Carl Icahn Compounded at 31% pa Over 20 Years Here are the 19 investing principles he lives by: 🧵
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12:02 PM ∙ Mar 23, 2023
583Likes152Retweets
Twitter avatar for @CoachJoeMoglia
Joe Moglia @CoachJoeMoglia
26 years ago this month, we took @TDAmeritrade public. It was such an accomplishment at the time, and it continues to be one of my greatest professional achievements. We had some excellent folks there, many of whom I'm proud to still call friends
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9:55 PM ∙ Mar 23, 2023
70Likes2Retweets

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