There is nothing more Free Market than failure. Bail-outs etc. are “third way” interventions where Government steps in. Particularly bad if they only step in when there is failure, and do not share in the up-side. A danger of basing your investment philosophy on a dance around what something is worth, rather than what it does, is that price and value can disconnect massively. It is particularly dangerous if you “bet” more than 100%, or are naked (have a position in something you do not own). You can trade anything with a pulse, the underlying thing does not matter as much as the person (legal or real) you are buying/selling from/to. You can leverage up a horrible asset to make great profits (until things go wrong). Investment is different. A basic principle of fundamental investing is that what you do matters. It is not gambling. It is capital allocation and problem solving. Shifting resources to where they are doing good work, and continuing to do good work over long periods of time. No one can force you to sell if the business is strong enough to carry on doing its work.
No comments:
Post a Comment