What a day. I mean the stock market. Monday IBM gave us some good news. Today neither Citi nor Apple (and New Oriental if I may add) sent out re-assuring news, and the market (both Dow and Nasdaq) tanked…
These days I started to read the Buffett shareholder letters date back to year 1978.
I also found this talk “human mis-judgement” given by Charlie Munger, vice chairman of Berkshire Hathaway, to be enlightening. Two things I immediately connected with:
1) Association: He mentioned Coke is associating its product with Olympics etc. I think McDonald is another genius doing this. It gives all kinds of toys to the kids. So as Buffett’s own Geico Car insurance, did you see all these “stupid” ads on TV?
Geico = a cool car insurance company.
2) Frog is not as alert to a slow cooker compared to being put into hot water. I know I have similar problem. Take my loss on Longtop as an example, I did not sell when it dropped a little every day. Today I decided to sell some eventually because it dropped more (under $17 the IPO price).
(source: creighton.edu)
Another word of wisdom from the Oracle of Omaha
When an investor who does not understand the economics of specific business nevertheless believes it is in his interest to be a long term owner of American industry. That investor should both own a large number of equities and space out his purchases. By periodically investing in an index, the know-nothing investor can actually out-perform most investment professionals. –Buffett