Some Time Ago

日期:2013/11/14

Some time ago Mr. Jovanovich posted an anecdote about old man Mellon to the effect that his kids never let him pay for a bill at a restaurant because the old man felt that prices should be the same as they were when he was a young man and that they were too high today. This is a common thing one runs into in certain people of age. They are accustomed to the old p/e, the average of the last 10 years, on those rare occasions in the 1930s when Ben Graham wasn't chasing the skirts, when you could buy companies at below their liquid cash, assuming incorrectly as he did that any shares were available and they weren't losing so much that the previous balance sheets were meaningless.

Galton had a way of dealing with such things, and he was the most revered man of his age, commanding universal respect, and heading all the leading scientific and geographic societies. "Let the bygones be bygones". Don't fret about bad things that happened, or look to take back the things that you could have done that would have made you so much better off. The woman you didn't marry. The stock you didn't pick. The limit order that wasn't filled.



I recently ran into this in a business meeting where I was trying to sell a company. When negotiations started the earnings of the company were half what they were when the negotiations resumed. The buyer was stuck on the old price and old earnings. The buyer consequently missed an opportunity to make a tremendous profit, of about 10 times his investment of millions in several years.

One often makes this mistake in the market. You try to catch a falling star and you miss it. And then it goes in the direction you had hoped. But you never come in again because you are trying to catch it at the bygone price. Anatoly once mentioned that he was trained in checkers by the KGB to learn to be an amnesiac so he wouldn't regret moves that he should have made on the board, and would look to the future.

In chess, the good players always say forget about the prices that have been taken and concentrate on the pieces that are on the board. I believe this is a common mistake in life and markets, and would be interested in the scientific and empirical and life and market lessons that you all have learned from similar ruminations.