“A short quiz:
If you plan to eat hamburgers throughout your life and
are not a cattle producer, should you wish for higher or
lower prices for beef? Likewise, if you are going to buy a
car from time to time but are not an auto manufacturer,
should you prefer higher or lower car prices? These
questions, of course, answer themselves. But now for the
final exam: If you expect to be a net saver during the
next five years, should you hope for a higher or lower
stock market during that period? Many investors get this
one wrong. Even though they are going to be net buyers
of stocks for many years to come, they are elated when
stock prices rise and depressed when they fall. In effect,
they rejoice because prices have risen for the
“hamburgers” they will soon be buying. This reaction
makes no sense. Only those who will be sellers of equities
in the near future should be happy at seeing stocks rise.
Prospective purchasers should much prefer sinking
prices.”
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