Tuesday, March 3, 2009

reading of John Neff on Investing

Inflection points abound All investing trends seem to go to excess eventually. In the Sixties, the go-go era swept investors in and judgement out. In the early Seventies, the Nifty Fifty ruled supreme. In 1980, some experts foresaw a $60 barrel of oil, transforming oil companies to gold. These fads clattered to their inevitable conclusions when expectations encountered reality. Fans bolted for the nearest exists, and sobriety returned to the marketplace. History books record similar extravaganzs stretching back centuries, frequently with special attention to the celbrated tulip-mania that drove tulip bulb prices sky-high in 17th century Holland. Excess invariably give rise to inflection points. Signaling the end of trends going too far, inflection points alter the investment landscape. ... Inflections occur over extended perios, as in the drawn-out end to spiraling oil costs. Or they can occur in a single day, as in the 20.7 % market decline by the S&P 500 in Oct 18th 1987. --Refusal to partake in groupthink --neck-out stand against the marketplace Learn what makes an industry tick Windsor chalked up its most eye-catching gains after anticipating correctly major inflection points. The ability to see these shifts coming and gear up for their aftermath requires both top-down and bottom-up analysis. A wise investor studies the industry, its products, and its economic structure. ...Prudent investos always stay abreast of developments, which is why casual investors usually get wind of change after the stock prices adjusts.

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