C4

$阿莱技术公司(ALGN)$

Just as the inadequacy of investors’ risk aversion allows them to push prices up and buy at the top—egged on by the vision of easy money in a world in which they can’t discern any risk—in less positive times they push prices down and sell at the bottom. Their unpleasant experience convinces them—contrary to what they had thought when everything was going well—that investing is a risky field in which they shouldn’t engage. And, as a consequence, their risk aversion goes all the way from inadequate to excessive.

They become worrywarts. Just as risk tolerance had positioned them to become buyers of overpriced assets at the highs, now their screaming risk aversion makes them sellers—certainly not buyers—at the bottom. (pages 114–115)

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During panics, people spend 100% of their time making sure there can be no losses . . . at just the time that they should be worrying instead about missing out on great opportunities.

In times of extreme negativism, exaggerated risk aversion is likely to cause prices to already be as low as they can go; further losses to be highly unlikely; and thus the risk of loss to be minimal. Thus, the safest time to buy usually comes when everyone is convinced there’s no hope. As risk attitudes swing from high to low, so do opportunities for profit or loss. When everything’s going well and asset prices are soaring, investors tend to view the **re as rosy, risk as their friend, and profit as easily achieved. Everyone feels the same, meaning little risk aversion is incorporated in asset prices, and thus they’re precarious. Investors become risk-tolerant just when they should increase their risk aversion.

And when events are down, so are investors. They think of the markets as a place to lose money, risk as something to be avoided at all cost, and losses as depressingly likely. Under the excess of caution that prevails, (a) no one will accept possibilities that incorporate any optimism at all and (b) they likewise cannot countenance the possibility that an assumption could be “too bad to be true.”

Just as risk tolerance is unlimited at the top, it is non-existent at the bottom. This negativity causes prices to fall to levels from which losses are highly unlikely and gains could be enormous. But the sting of prior declines tends to increase risk aversion and send investors to the sidelines just as prices (and thus risk) are at their lowest. (page 116)

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Understanding how investors are thinking about and dealing with risk is perhaps the most important thing to strive for. In short, excessive risk tolerance contributes to the creation of danger, and the swing to excessive risk aversion depresses markets, creating some of the greatest buying opportunities.

The fluctuation—or inconstancy—in attitudes toward risk is both the result of some cycles and the cause or exacerbator of others. And it will always go on, since it seems to be hard-wired into most people’s psyches to become more optimistic and risk-tolerant when things are going well, and then more worried and risk-averse when things turn downward. That means they’re most willing to buy when they should be most cautious, and most reluctant to buy when they should be most aggressive. Superior investors recognize this and strive to behave as contrarians. (pages 134–135)

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Changes in the availability of capital or credit constitute one of the most fundamental influences on economies, companies and markets. Even though the credit cycle is less well-known to the man on the street than most of the other cycles discussed in this book, I consider it to be of paramount importance and profound influence.

When the credit window is open, financing is plentiful and easily obtained, and when it’s closed, financing is scarce and hard to get. Finally, it’s essential to always bear in mind that the window can go from wide open to slammed shut in just an instant. There’s a lot more to fully understanding this cycle—including the reasons for these cyclical movements and their impact—but that’s the bottom line. (page 138)

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Prosperity brings expanded lending, which leads to unwise lending, which produces large losses, which makes lenders stop lending, which ends prosperity, and on and on. (page 143)

Looking for the cause of a market extreme usually requires rewinding the videotape of the credit cycle a few months or years. Most raging bull markets are abetted by an upsurge in the willingness to provide capital, usually imprudently. Likewise, most collapses are preceded by a wholesale refusal to finance certain companies, industries, or the entire gamut of would-be borrowers. (page 147)

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