Am not a huge stock market guy by any means. The vast majority (I mean, vast – like 98% or something) of my personal net worth is in LA real estate.
Still, I am interested in the public equity markets because they’re fascinating. And today’s Brexit-related market gyrations put me in mind of Benjamin Graham’s famous parable about Mr. Market.
Here’s Wikipedia’s paraphrase:
“Graham asks the reader to imagine that he is one of the two owners of a business, along with a partner called Mr. Market. The partner frequently offers to sell his share of the business or to buy the reader’s share. This partner is what today would be called manic-depressive, with his estimate of the business’s value going from very pessimistic to wildly optimistic. The reader is always free to decline the partner’s offer, since he will soon come back with an entirely different offer.”
Today, Mr. Market has decided he’s willing to take 3% less for his shares than he was yesterday.
So, you have to think: Does the UK leaving the EU really reduce the value of the 500 largest companies in America by 3%?
The answer is almost certainly not… the UK represent like 3% of our total trade, and that trade isn’t going away because of Brexit.
So, we basically have a “Mr. Market” type situation where the crazy guy is offering to sell his shares cheaply because, well, he’s crazy.
If you liked the stock market yesterday, you should like it more today, not less. And if you didn’t like it yesterday, maybe take another look now.