The expectation market. Prices are not set by real things like sales margin or profits. In short term, stock prices go up only when expectations of investors rise not necessarily when sales, profits or margins rise. The stock market is a giant distraction to the business of investing.
To this crucial distinction, I would add the expectation market is largely a product of the expectation of speculators trying to guess what other investors will expect and how they will act as every bit of information finds its way into the market place. The expectation market is about speculation. The real market is about investing.
The stock market then is a giant distraction to the business of investing. Too often, the market causes investors to focus on transitory and volatile short term expectations rather than what is really important, the gradual accumulation of returns earned by corporate businesses.
My advise to investors, ignore the short term sound and fury of emotions reflected in financial market and focus on productive long term economics of our corporate businesses. The way to investment success is get out of the expectation market of stocks prices and cast your lot with real market of business. Don’t take my word for it.
As John Graham said “In short run, the stock market is voting machine, in long term, its a weighing machine”
