Mr market is a drunken psycho…!

Mr. Market, this word was first used by Benjamin Graham in 1949, In his book Security Analysis. And we got to see Warren Buffett advocate the same word many times to his investors and in tv interviews. To understand this well, we have to take an example.

Let’s say you are a business partner of a successful company. And that business is going on very well. It creates 25% profit every year consistently form last 10 years. You are also earning good profits. And a guy has seen this business of yours. He just wants to buy your stake in that business.

One of his everyday activities is, every morning he comes during your tea time and offers you a price for that stake. In his offer, one thing is very weird which should be noticed. It came every day, but his offers were always different. If his mood was good, he would offer a big price, which is more than the valuation of your business. But when his mood was disturbed, he used to offer a very small price while in depression.

What should I do here? Should you sell the stock in his good behavior and good offer price? or when he is very afraid and himself remains in depression, at that time accept his offer?

Let us know what is the reaction of Warren Buffett and Benjamin Graham on these offers and who is this Mr market.

Who is Mr. Market: –

The Mr market is mentioned in the book by Benjamin graham. Then there were no televisions or no internet facilities. The people are completely dependable on newspapers. And this newspaper was given the name of ‘Market’ by Mr. Benjamin Graham.

Which he used to read every morning with a cup of tea. When the market used to be up, the price of all stock is very high. this is what the Mr markets good offer.  And when the market was down, the stock is offered at low prices. Which we talk about the offer of Mr market. The market keeps on offering you the price according to condition.

Mr. Warren Buffet: –

Mr. Buffett says that this Mr market is a drunken psycho. Because sometimes he makes such a big offer, so sometimes too small for the same business.

But you can also take advantage of this behavior. It is their suggestion that, when you get a big offer in the market, you accept it. and when you get a very small price offer from the market just buy it again. The simplest way of wealth creation is in the stock market.

Mr. Benjamin Graham: –

We all know that Buffett considers Benjamin a guru. And he was inspired by his books. When Graham has this in mind about Mr Market, you should avoid all the offerings. Be it a good offer or a bad one. You have to believe in your business, and leave it to compound.

But at that time there was no internet or TV support. Still, people used to sell or buy shares out of fear or greed. But the situation has changed a lot now. Now the market keeps on offering you not on tea in the morning, but on mobile all the time. It offers a lot of various prices to you, not from one mood and at one time in a day. But from different moods every hour. This is the reason why Buffett is called Mr. Market a drunken psycho.