Investor over-optimism—and its evil twin, over-pessimism—are what make Mr. Market bipolar. The good news for people who can keep their level of optimism at rational levels is that the unpredictable but inevitable gyrations between these two states create opportunities for Graham value investors. Staying rationally optimistic as the market gyrates is very difficult. Only a small number of people can do it successfully. Even experts who spend their lives studying behavioral economics can fall prey to the over-optimism and over-pessimism tendencies. For example, Nobel Prize winner Daniel Kahneman
...more
