Psychology of finance (Some quotes)

If a stock arises,  the company’s credit rating improve, as well as its opportunities to finance activities with the loans or by issuing new stock. The company’s general image among its product’s users will also improve, and it will become more popular among potential executives. Price fluctuations thus have an impact on true value.

The situation is not very different on commodities markets. On many of these markets, supplies have form cartels in an attempt to control prices. During price increases, cartel members have little difficulty meeting their commitments: discipline is maintained. But if prices drop, the weakest often react by increasing production to secure a stable revenue. Consequently, the supply curve become distorted so that, in the short term at any rate, rising prices are an incentive for production cutbacks, while falling prices give increased supply, which in turn exert pressure on prices. (P. 7)

It might have been supposed that competition between expert professionals, possessing judgment and knowledge beyond that of the average private investor, would correct the vagaries of the ignorant individual left to himself. It happens, however, that energies and skill of the professional investor and speculator are mainly occupied otherwise. For most of these persons are, in fact, largely concerned not with making superior long-term forecast of the probable yield of an investment over its whole life, but with foreseeing changes in the conventional basis of valuation a short time ahead of the general public.

The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelop our future. The actual, private object of the most skilled investment today is ‘to beat the gun’, as the Americans so well express it, to outwit the crowd, and to pass the bad, or deprecating, half crown to the other fellow. (P 8) Keynes

Comment: This is also true in research. Researchers don’t attempt to defeat the dark force of time and ignorance.

You see the little lines of cleavage running through the character, the tricks of thought, the prejudices, the ways of the ‘shop’, in a word, from which the man can by and by no more escape than his coat sleeve can suddenly fall into a new set of folds. On the whole, it is the best he should not escape. It is well for the world that in most of us, by the age of 30, the character has set like plaster, and it will never soften again. (P 60) William James

To most of us nothing is so invisible as an unpleasant truth. Though it is held before our eyes, pushed under our noses, rammed down our throats— we know it not.     P. 191.   Eric Hoffer