The Mind of Wall Street: A Legendary Financier on the Perils of Greed and the Mysteries of the Market

The mid-1970s were not a productive time for the markets, which stagnated between 1964 and 1982; the Dow closed at 874 in 1964 and at 875 in 1981, racking up a magnificent gain of one point in seventeen years. Anybody who began investing in the 1990s, and had the expectation that stocks regularly outperform all other investments, should spend a mom

both cases, psychology proved critical. Napoleon’s delusion was to believe in military strategy and underestimate the role of morale; his generals failed to appreciate that Russian citizens battling for their lives on their home soil had far greater incentive to fight than did a poilu from Paris yearning for the Champs Elysées. The LTCM strategists

A good idea, a long-term perspective, and the creativity to implement a strategy to profit from your insight are necessary to prosper in finance, but they are not sufficient. None of these qualities will bear fruit unless you have the discipline to stay with your strategy when the market tests your confidence, as it inevitably will.

One truth of archaeology in particular bears directly on my thinking. Archaeologists have their specialties, and one of the curiosities of the field is that those who specialize in one aspect of antiquity tend to be blind to anything else. Archaeologists who look for pottery sherds will not see coins, and, conversely, those who look for coins will

I think that one of the greatest mistakes of economics was to separate itself from other disciplines. You can’t understand economics without understanding philosophy and history.

(It is interesting to note that any profitable market strategy, no matter how obviously it is driven by greed, always is deemed good for society by those who reap the profits.)

The message is that mood or investor psychology is as important to markets as is information. It requires tremendous discipline to apply this understanding to one’s behavior.

INVESTORS, we deceive ourselves a thousand different ways, both small and large. We attribute gains to acumen when they are the product of luck, and attribute losses to ill fortune when they are often the product of stupidity or inattention. We believe that the market remembers or cares about the price we paid for a stock, or that our stocks will g

All we can ever do is look at the past to predict the future, but life is dynamic and constantly changing, so the assumptions governing predictions are bound to be wrong.