The curse of forecasts
The following quote caught my eye from Graham's "Investing Intelligently," which describes the fundamental plight of investing today. Especially in bull markets and investing in tech stocks knows one burden: forecasts.
It seems a truism that past investors in common stocks showed little interest in capital gains. They bought the stock almost exclusively for safety and income, leaving the speculator alone to evaluate the price. Here, we would probably say that the more the experienced and wise investor cares about long-term valuation, the less he pays attention to dividend yield. Still, one could argue that because the earlier investor didn't care about future price appreciation, he sort of guaranteed himself that he would get it, at least in the area of industrial stocks. In contrast, today's investor is so concerned with the price trend to anticipate the future that he pays decently for it in advance. Thus, what he puts a great deal of effort and care into predicts will actually happen and hardly bring him any profit. If the profit does not materialize to that extent, then he actually faces a serious loss, partly temporary, partly permanent.
(...)
We can take a nostalgic look back to the good old days when we only paid for the present and got the future for free- a combination of all that, plus the sky. Shaking our heads sadly, we mutter, "Those days are gone forever." Didn't investors and stock analysts eat from the tree of knowledge of good and bad prospects? When they did, did they not exclude themselves forever from the Garden of Eden where promising stocks could be plucked from the bushes at reasonable prices? Are we condemned to always have to take the risk that we will be either that we are paying far too high prices for good quality and future prospects or that we pay or that we will get bad quality and bad future prospects if we pay a seemingly reasonable price.?
It looks quite like it.
