“Mr. Market gives you opportunities to buy above and below intrinsic value.”
That Mr. Market should be your servant and not your master is the third of four bedrock principles of Ben Graham-style value investing. Mr. Market is a bipolar maniac rather than a perfectly informed rational agent. Prices in markets will inevitably move rapidly and unpredictably up and down. Markets are far from wise in the short term. This is obvious to a child of ten. Warren Buffett writes: “Ben’s Mr. Market allegory may seem out-of-date in today’s investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising ‘Take two aspirins’”?