No. 51 · Risk · Economics
Mr Market
The market is a moody partner: use its offers, never its moods.
In the Almanac
“A&P’s gloomy price”, 1938 · “Oaktree Capital”, 2020
Both stories in full, three ways to use it and where it misleads.
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Questions
What is Mr Market?
Mr. Market is Benjamin Graham's picture of the stock market as a moody business partner who offers to buy or sell every day at prices driven by emotion rather than value. In fearful moments, such as the 1938 recession or the March 2020 crash, prices can fall far below what assets are worth.
How do you use Mr Market?
Treat Mr. Market's quotes as offers you are free to ignore, not instructions. Do your own analysis of value, keep a list of quality assets you would like to own, and act only when price and value diverge in your favor. Stay calm when others are euphoric or panicked.
When does Mr Market matter?
Mr Market is one of the 32 mental models for risk, the situations where you ask: What could go wrong, and what will I do if it does? Within that, it belongs to “Misreading chance”, alongside Availability Bias, Conjunction Fallacy and Gambler’s Fallacy.
What is an example of Mr Market?
Two stories show it at work: A&P’s gloomy price (1938) and Oaktree Capital (2020). Both are told in full in The Mental Models Daily Almanac, which has two stories for each of its 365 models.
Which mental models are related to Mr Market?
Margin of Safety, Bandwagon Effect and Fear. Mr Market itself comes from economics.