We conclude that most of the time, the future will look a lot like the past, with both up cycles and down cycles. There is a right time to argue that things will be better, and that’s when the market is on its backside and everyone is selling things at giveaway prices. It’s dangerous when the market’s at record levels to reach for a positive rationalisation that has never held true in the past.

It’s worth noting that the assumption that something can’t happen has the potential to make it happen, since people who believe it can’t happen will engage in risky behaviour, and thus alter the environment.

If one is approached with a deal predicated on cycles having ceased to occur, remember that invariably that’s a losing bet.

Selling for more than your asset’s worth. Everyone hopes a buyer will come along who’s willing to overpay for what they have for sale. But certainly the hoped-for arrival of this sucker can’t be counted on. Unlike having an underpriced asset move to its fair value, expecting appreciation on the part of a fairly priced or overpriced asset requires irrationality on the part of buyers that absolutely cannot be considered dependable.

Here’s the key to understanding risk: it’s largely a matter of opinion.

Warren Buffett tells us, “The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.

There’s a big difference between probability and outcome. Probable things fail to happen – and improbable things happen – all the time.” That.

The most dangerous thing is to buy something at the peak of its popularity. At that point, all favourable facts and opinions are already factored into its price and no new buyers are left to emerge.

There’s a big difference between probability and outcome. Probable things fail to happen – and improbable things happen – all the time.” That’s one of the most important things you can know about investment risk.

If everyone likes it, it’s probably because it has been doing well. Most people seem to think that outstanding performance to dates presages outstanding future performance. Actually, it’s more likely that outstanding future performance to date has borrowed from the future and thus presages subpar performance from her on out.