“When markets are at extreme highs or lows, the essential requirement for achieving a superior view of their future performance lies in understanding what’s responsible for the current conditions. Everyone can study economics, finance, and accounting and learn how the markets are supposed to work. But superior investment results come from exploiting the differences between how things are supposed to work and how they actually do work in the real world. To do that, the essential inputs aren’t economic data or financial statement analysis. The key lies in understanding prevailing investor psychology.”
—Howard Marks.
