Summary
- The stock market is not a weighing machine in the long run.
- Graham explicitly denied the weighing machine metaphor, emphasizing the market is always a voting machine, driven by emotion and opinion.
- Graham’s philosophy does not support the idea that the value of stocks will be appropriately “weighed” by the market in the future.
- The market operates as a continuous double auction. The price of any stock always reflects valuations located at the optimistic fringe of the distribution of valuations for that stock.
- Successful Portfolio Strategy members get exclusive access to our real-world portfolio. See all our investments here »
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In the investment business, there are few “quotes” that are repeated more often than:
In the short run, the stock market is a voting machine, but in the long run, it is a weighing machine.
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