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Fundamentals Quotes

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Fundamentals Quotes

“At the core of an analytical edge is an ability to systematically distinguish between fundamentals and expectations. Fundamentals are a well thought out distribution of outcomes, and expectations are what's priced into an asset. A power metaphor is the [pari-mutuel] racetrack. The fundamentals are how fast a given horse will run and the expectations are the odds on the tote board. As any serious handicapper knows, you make money only by finding a mispricing between the performance of the horse and the odds. There are no 'good' or 'bad' horses, just correctly or incorrectly priced ones.”

“One of the most important analytic tools when assessing an investment is an intellectually advantaged disparate view. This includes knowing more and perceiving the situation better than others do. It is also critical to have a keen understanding of what the market expectations for any investment truly are. Thus, the process by which a disparate perception, when correct, becomes consensus should lead to meaningful profit. Understanding market expectation is at least as important as, and often different from fundamental knowledge.”

“[Regarding] the soul, I'm a little wary of any discourse on that topic that pretends to have an answer, so I tend to keep my musings to myself. There is interesting, legitimate metaphysical work on the topic going at least as far back as Leibniz and continuing today, following the theme that consciousness, or at least computation, might be at least as fundamental as phenomena such as space, time, energy, and matter, which are the usual subject matter of physics. I follow that sort of thing with interest but with very modest expectations that answers will be arrived at during my lifetime.”

“Economists who adhere to rational-expectations models of the world will never admit it, but a lot of what happens in markets is driven by pure stupidity - or, rather, inattention, misinformation about fundamentals, and an exaggerated focus on currently circulating stories.”