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Warren Buffett talks about buying dollars for 50 cents. That's a good thing to do. But it rely it it relies on other people who don't understand that those are 50 cent dollars. For every strategy, for every uh investment approach, there are times that produce a lot of opportunity. There are times that are uh what the farmer would callow, slow periods.
And you have to know the difference and you have to wait patiently until the opportunities come along and then you have to move aggressively to take advantage of the opportunities. And once you do so and they and they make you money and uh the markets recover, then you should step back again and become patient once again.
It's it's it's wrong to think that there are always great opportunities. Sometimes there are not. And I believe that the availability of opportunities depends on the market and it depends most importantly on the behavior of other investors. We've we've gone through a long period um from the middle of 2009, the end of the global financial crisis to early 2020, the beginning of the pandemic.
We were in a period where the central banks provided easy money. Interest rates were low. Financing was easily available to anybody who wanted to get money. People were eager to provide the money. Buyers were enthusiastic. Sellers were complacent. They were not eager to sell. Risk aversion was low. Fear was low.
The greatest fear for many of those years was what we call FOMO. Fear of missing out. When the market is in this condition, nobody's selling eagerly. Why should prices be low? They shouldn't be. There are no bargains in that climate. That is a time for caution. And you must recognize what's going on.
I wrote a memo to my clients in February 2007 called the race to the bottom and it talked about what happens when people have too much money and they're too eager to invest. The opportunities deteriorate. You have to understand the conditions that you're in. And then usually they take on too much risk.
The structures that they build are too risky. something happens, some trigger event, and uh it collapses. Now, everybody's terrified, and nobody's eager to buy. Everybody wants to get out. Fear of losing money replaces fear of missing out. And this is the time when bargains are readily available. But you need the courage.
You have to understand what's going on. And you have to have the courage to take advantage of those of those bargains. And so if you accept that the market fluctuates in this way, cycles we call them, then clearly it's not wise to behave the same all the time. You have to vary your behavior commensurate with what's going on in the cycle.
The goal is to be counteryclical. Normally what happens is when things are going well, economic reports are good, companies are reporting good profits, stock prices and security prices are rising. People feel good. They buy and the higher they go, the more they buy. Then they reach a maximum for some reason.
Maybe there's a negative event or maybe the economy just turns down and the economy is deteriorating and company reports are not as good and stock prices are falling and now people get depressed and they sell and the lower the prices go the more eagerly they sell. This is wrong. What we want to do is buy low and sell high.
Human nature causes us to buy high and sell low. So that is what I call pro-yclical behavior. At minimum we want to avoid it and at maximum we want to do the opposite. Mhm. Now it's not easy because what you have to do is you have to restrain your enthusiasm as things are positive and you have to turn more positive as things are negative.
Very hard to do. Uh some professionals can do it. Not too many amateurs can do it. But at minimum you want to not be emotional and not succumb to the cycle. So rather than buy high and sell low, maybe you say I'm just going to hold throughout. You see? So that's that's obviously better than being proyclical.
Of course, the best thing in the world is to be counteryclical at the right times, but it's not easy. And um uh people should not try uh with with the money they need. Uh but anyway, my my career has basically consisted of these cycles and market timing most of the time uh is too hard to try. Now when I was working on my book about the cycle, I said to my son who is a very important uh sounding board for me.
I said, 'You know, I think my market calls have been correct over my career. And you know what he said to me? That's cuz you did it five times in 50 years. Mhm. This is a very important concept. And you know, he he he looks at all these questions with fresh eyes and makes great observations. Five times in my life, the market was here or here.
And on those occasions, the error was obvious. The argument was compelling. The chance of being right was very high. Here or here? What about here? Or here or here or here? In between, it's not so obvious. And uh the chance of being wrong is quite substantial. That's why people should not try this on a regular basis.
And we don't try on a regular basis. We don't change from month to month or year to year only in the extremes. And and you know and we're professionals and we think we understand the process and yet we don't try that often to time the markets. Mhm. Um
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