Came across this while reading Marks last night. Mention of “the pendulum” among market watchers is nothing new. But, IMHO, Marks really nails it with this one.
“The mood swings of the securities markets resemble the movement of a pendulum. Although the midpoint of its arc best describes the location of the pendulum “on average,” it actually spends very little of its time there. Instead, it is almost always swinging toward or away from the extremes of its arc. But whenever the pendulum is near either extreme, it is inevitable that it will move back toward the midpoint sooner or later. In fact, it is the movement toward an extreme itself that supplies the energy for the swing back.
Investment markets follow a pendulum-like swing:
- between euphoria and depression,
- between celebrating positive developments and obsessing over negatives, and thus
- between overpriced and underpriced.”The Most Important Thing - Howard Marks
https://business.ohio.edu/media/1052637/the_most_important_thing_howard_marks.pdf
