10 Lessons From Bob Farrell - 03/12/10

  It's a wonderful list to reread every so often, whether one is doing well or poorly in the markets.

 

 

Isn't it rich?
Isn't it queer,
Losing my timing this late
In my career?
And where are the clowns?
There ought to be clowns.
Well, maybe next year.

-- Stephen Sondheim, "Send in the Clowns"

Thursday afternoon the Divine Ms. M. passed on to me this classic list written by the legendary Merrill Lynch technical analyst and overall great guy, Bob Farrell.

I have always said that reading lessons and advice by those who have walked the walk on Wall Street is always a worthwhile endeavor.

Bob's 10 lessons represent such important advice. It's a wonderful list to reread every so often, whether one is doing well or poorly in the markets:

  1. Markets tend to return to the mean over time.

     

  2. Excesses in one direction will lead to an opposite excess in the other direction.

     

  3. There are no new eras -- excesses are never permanent.

     

  4. Exponential rising and falling markets usually go further than you think.

     

  5. The public buys the most at the top and the least at the bottom.

     

  6. Fear and greed are stronger than long-term resolve.

     

  7. Markets are strongest when they are broad and weakest when they narrow.

     

  8. Bear markets have three stages.

     

  9. When all the experts and forecasts agree, something else is going to happen.

     

  10. Bull markets are more fun than bear markets.