Everyone Believes It; Most Will Be Wrong: Motley Thoughts on Investing and the Economy

But to quote Buffett again, who once ridiculed a different group of defunct financiers: "To make money they didn't have and didn't need, they risked what they did have and did need. And that's foolish. It is just plain foolish. If you risk something that is important to you for something that is unimportant to you, it just does not make any se

Danger is when something can be stated as fact, without facts backing it up, and still be accepted by most.

The greatest investors make it clear that they won't sacrifice long-term performance for short-term window dressing. Why would they? They're out to earn as much as possible. Google's IPO prospectus has a great quote: "A management team distracted by a series of short term targets is as pointless as a dieter stepping on a scale every half hour.

There's the old saying, "No one ever dies wishing they saved more money." Maybe true, but plenty live wishing they had.

Economic history can be summed up as the story of impeccably bad forecasting. Busts start when the future looks the brightest, and booms are born when the end looks near, but you never know when those stages hit until they're behind you.

If someone earning $35,000 a year doubles their income to $70,000, they move from the 43rd percentile to the 67th percentile -- a massive move that pushes them ahead of many peers. They've gained social ground. They feel much better off. But then the slope explodes. If someone making $250,000 doubles their income to $500,000, they move from the 97t

Growth isn't slow because of public policies; it's slow because we're deleveraging. Growth won't return when someone else is elected into office; it will return when we're done deleveraging. That won't be this month, next month, or even next year. At current rates, it'll be several years at least. That's why it's so hard to recover today. Don't bla

The main distinction is that those who make the best predictions have a collection of little ideas and are always incorporating new information into their outlooks, while those making the worst predictions have one grand theory that they trumpet through thick and thin. Tetlock calls the former foxes, the latter, hedgehogs.

In his excellent book Your Money and Your Brain, Jason Zweig shows how powerful this can be. In a survey of 800 people with a net worth of at least $500,000, 19% said that having enough money was a constant worry. For those with a net worth of at least $10 million, 33% felt this way. "Somehow," Zweig writes, "as wealth grows, worry g