Incidentally by one weekend while thinking on human madness, we came across a maxim of investment from the legendary contrarian investor Sir John Templeton, he said: “The four most expensive words in English are: This time it’s different.”
Contact to invest with Golden River – Vietnamese rare value investment manager: http://goldenriverinvestment.com/contact/
If we think about it really hard, we would see that how correct this timeless quote is… From the Great Depression of 1929, to the 1999 dotcom bubble and the 2008 financial crisis, people thought: “This time it has already been different, all Americans will become rich”. “This time it’s different, old-fashioned conservative gals like Buffett are gone, dot-com companies will grow like rockets” “This time it will be different, all Americans will have their own houses, real estate and finance companies will grow at a permanent double-digit rate!”
Just like Mr. Benjamin Graham said, people in Wall Street learn nothing and forget everything: people soon to forget all the painful lessons of the past, and all the eternal principles of investing. So what is that eternal principles?
(1) The intrinsic value of the business behind every stock and the investment time are eternal power. In short term, prices are widely determined by the majority market participants. But in the long term, all of the unrealistic expectations or emotional fears will return to the realistic business condition and the reasonable valuation that it should be priced.
(2) People – especially crowds – have always been irrational, whether it is the 1600s of Tulippomania or 1900s or 2000s, or anywhere in the world. They act based on short-term psychology forces, believing that recent events are indicative of a permanent trend. If we do not have an independent mindset, and gradually mix with the crowd subjectively, sooner or later we will have to pay a very expensive lesson just like the warning of Sir John Templeton.
Now, in a small and rapidly sprouting country like Vietnam, people see a generation of speculators keep following the previous steps, believing the old maxim that “this time it will be different”. They speculate on margin leverage, believing that growth in a bubble year is the sign of an eternal future. In this crazy scene, only value investors who understand the eternal investment philosophy would take a step back, they look at the crowd, look back at themselves, then smile peacefully, and patiently wait for the flow of life to return to its core principles …
(quoted & translated from The Golden Newsletter Vietnam: https://newslettervietnam.com/cham-ngon-dau-tu-4-tu-dat-gia-nhat-trong-tieng-anh-ngai-john-templeton/)