Stock Market Magic Formula? by Investment Master Class

 

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"Books sell with titles like How I Made a Million or You Can Make Millions, with very little content at all.  They are the most dangerous things because inevitably there is some mechanical formula somewhere within"  Adam Smith, The Money Game

famous value investors value investment Magic Formula

Magic Formula

[drizzle]"Get-rich-quick schemes just don't work. If they did, then everyone on the face of the earth would be a millionaire. This holds as true for stock market dealings as it does for any other form of business activity"  J Paul Getty

"Nothing works all the time and in all kinds of markets.  That is what is wrong with systems and the books that tell you You Can Make a Million Dollars"  Adam Smith, The Money Game

"I wish I had a magic bullet!  My God, wouldn't life be easy" Jim Rogers

"Not only am I unaware of any formula that alone will lead to above average investment performance, but I'm convinced such a formula cannot exist.  According to one of my favourite sources of inspiration, the late John Kenneth Galbraith: "There is nothing reliable to be learned making money.  If there were, study would be intense and everyone with a positive IQ would be rich"  Howard Marks

“The financial markets are far too complex to be incorporated into a formula. Moreover, if any successful investment formula could be devised, it would be exploited by those who possessed it until competition eliminated the excess profits” Seth Klarman

"If there were any infallible mechanical method of forecasting the major swings of the stock market, there could be no major swings.  If every trader knew or could discover by a half-hour's investigation that the stock market was about to go down, there would be no buyers" Philip Carret

"We haven't succeeded because we have some great, complicated systems or magic formulas we apply or anything of the sort.  What we have is just simplicity itself"  Warren Buffett

“Anyone who thinks he can formulate success in this racket is deluding himself, because it changes too quickly. As soon as a formula is right for any length of time, its own success carries the weight of its inevitable failure” Michael Steinhardt

“There is no perfect strategy. People flocked in droves to growth stock investing, real estate, portfolio insurance, Japanese stocks, emerging market stocks, tech stocks, dot-coms and venture capital.  Each worked for a while and sucked in more and more investors. But in each case, success eventually pulled in enough money to guarantee failure” Howard Marks

“Modern economies are too complex to be reliably modelled; their connections and correlations to loose and imprecise, the second-and third-order effects largely immeasurable, the fickle vagaries of individual and aggregate human behaviour utterly unknowable” Seth Klarman

“Markets and the course of the economy are not model-able scientific phenomena but rather are examples of mass human behavior, which are never predictable with anything like precision" Paul Singer

“If successful investing was as simple as a mathematical formula, everyone would have nothing but winners in their portfolio” Christopher Browne

“If you could tell the future from a balance sheet, then mathematicians and accountants would be the richest people in the world by now” Peter Lynch

"It has been said that, if anyone thinks he has a formula for analysing common stocks, he does not understand how to analyse common stocks" Ed Wachenheim

“If the investment game were all about numbers and calculations, then, in theory, given the computer programs available these days, you should be able to punch in the right criteria and make money all the time. It doesn’t work that way.“ Thomas Kahn

“The point is that no mechanical tools can enable investors to prosper under all circumstances. They can provide tilts or reduce exposures, but the tool that promises a mix of good results and great results without the possibility of bad results is too good to be true” Howard Marks

“In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behaviour of stocks and markets. Rather an investor will succeed by coupling good business judgement with  an ability to insulate his thoughts and behaviour from the super-contagious emotions that swirl about the marketplace” Warren Buffett

"I've always been suspicious of theories about the nature of markets and my experience as an investor has only served to harden this bias.  It is highly unlikely that any of us will encounter a unified theory of markets - some equation with variables into which an investor can plug numbers and derive an answer as to where to invest.  To the degree that markets are governed by psychology, they resist reduction to some neat theory or system" Leon Levy

"There is no one, unlike e equals mc squared, there is no one formula to investing.  There's no easy way.  The success comes through really thinking about things, looking at the underlying economics, trying to understand those economics, and then looking at where you can buy those economics in the market".  David Abrams

"The problem with developing expert systems for trading is that the "rules" of trading and investment game keep changing.  I have spent some time working with expert system developers, and we concluded that trading was a poor candidate for this approach, because trading decisions encompass too many types of knowledge, and the rules for interpreting the information keep changing"  Bruce Kovner

"Those formulas that gain adherents and importance do so because they have worked well over a period, or sometimes merely because thay have been plausibly adapted to the statistical record of the past.  But as their acceptance increases, their reliability tends to diminish.  This happens for two reasons;  First the passage of time brings new conditions which the old formula no longer fits.  Second, in stock-market affairs the popularity of a trading theory has itself an influence on the market's behaviour which detracts in the long run from its profit-making possibilities"   Benjamin Graham

"If this was easy, if there was one formula, one way to do it, we'd all be zillionaires" Paul Tudor Jones

"We don’t have any magic black-box program that generates our returns; I wish we did." Lee Ainslee

"If you believe that you or anyone else has a system that can predict the future of the stock market, the joke is on you" Ralph Wanger

"I would like to convince young businesspeople that a magic formula which is infallible and leads to sure success in business does not exist… that there is no automatic set of rules that will make a person a millionaire." J P Getty

"It is unlikely that, in this ever-changing world any formula will ever successfully replace the study and objective analysis of individual securities." Irving Kahn

"No computer could be programmed to automate the work of our craftspeople.  Investing for us is a highly creative and unpredictable process, not the formulaic one that some might imagine." Seth Klarman

"If there were a book that could teach you how to make money, you would be at the end of a long line down the street from any bookstore"  Mark Spitznagel

"We don't use numeric formulas and take into account many factors, like a bridge hand.  There never will be a formula that will make you rich.  If that were true, every person who got A's in algebra would be rich"  Charlie Munger

"There is no system to beat the market.  The future is never a simple replay of the past" Leon Levy

"We don't have any kind of magic screen"  Alex Magaro

"Unskeptical belief that the silver bullet is at hand eventually leads to capital punishment"  Howard Marks

"It is said that if investing could be reduced to formulas, the richest people in the world would all be mathematicians"  Ed Wachenheim

"I would certainly ignore the advice of promoters and theorists who peddle harebrained formulas or "secret" methods for making huge and quick profits on the stock market. There has been a spate of books in recent years. Seasoned financiers and investors laugh at them—or rather, they feel only pity for the gullible individuals who follow the "advice" contained in such tomes." J Paul Getty

"There are no relationships or equations that always work.  Quantitatively based solutions and asset allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle, whereas the next one remains a riddle wrapped in an enigma"  Barton Biggs

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