Mr. Market

Back in 1949 when Benjamin Graham shared his concept of “Mr. Market” in his book The Intelligent Investor, cryptocurrencies didn’t exist and the financial markets were quite different than they are today.

Does that mean the principles behind Graham’s concept of Mr. Market are no longer relevant?

Quite the contrary…

Mr. Market is said to be a fictional stock market participant who is willing to buy or sell your stocks from you on any given day, everyday. 

With the evolution of our financial markets and the new financial assets we have access to, I don’t believe Mr. Market is constrained to the traditional markets, mainly the stock market, as he was in Graham’s day.

Today, Mr. Market is a fictional financial markets participant who is willing to buy or sell your financial assets from you on any given day, everyday.  

As he was in 1949, Mr. Market is still driven by panic, euphoria, and apathy today.

Because Mr. Market is driven by wild swings in pessimism and optimism, each day he has a different price in which he’s willing to acquire your financial assets for — sometimes the price is only slightly different than the previous day, while other times it varies dramatically. 

Dealing with Mr. Market’s wild swings in price is difficult by itself. When you add in news headlines and access to social media, it becomes even more difficult.

A recent news headline read, “What’s Behind the Nasdaq’s Tumultuous Tuesday Tumble?”

The Nasdaq was down 2.5% on the day that article was published… that’s far from what I would classify as “tumultuous”. 

There seems to be a general consensus for the past week or two about concerns of the stock market selling off, specifically driven by tech stocks. 

Add in bitcoin’s recent price action, a decline from about $65,000 to $32,000 in just a month, to the general stock market consensus lately, and it is safe to say many investors are on edge. 

Let’s zoom out for a second.

In the last year, the Nasdaq is up nearly 50%, the S&P 500 is up 41%, and bitcoin is up over 300% (even after this large decline). 

An investor who is acting in accordance with the principles taught by Graham in his book, The Intelligent Investor, use Mr. Market’s wild price swings to their advantage to be a truly intelligent investor. Those who don’t, fall victim to the short-term irrationality being displayed in the financial markets.

If you want to be, what Graham would define as, an intelligent investor, before you make any decisions regarding your investments, ask yourself this question, “has my investment thesis changed and/or has the asset experienced a shift that has fundamentally changed the future I believed it once had?” 

If you want to learn more about what bitcoin’s recent price action means for its future, see our podcast recordings live with guests such as Raoul Pal and Robert Cialdini, or any of the additional free content we’re putting out on YouTube, you can subscribe by clicking the button below!

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