Walter Schloss: It’s An Irrational World, So You Can’t Always Do Things Logically

Johnny HopkinsValue Investing, Walter J. SchlossLeave a Comment

Here’s an excerpt from a 1989 article featuring Walter Schloss titled – Searching for Value. In the article Schloss provides some great insights into the difficulty of investing logically in an irrational world:

A value-minded investor. Schloss views his business as rational—finding securities that are objectively undervalued compared to their ability to generate earnings.

“But its an irrational world, so you can’t always do things logically,” he adds. “Before World War II, the stock market acted terribly, because everyone was emotional—What’s Hitler going to do. The world’s coming apart—They would say—Keep your money in cash, you can’t buy stocks—They wanted to be safe.”

Schloss suggests that separating emotions from investing is often impossible. ‘‘What an investor does to some extent is based on his background. It’s very difficult to tell somebody who is fearful of stocks. Yeah, you should put your money in the stock market. If your father lost his money in the Depression, you’ll see things differently.”

Narrowing the point, he observes: “I owned some bankrupt bonds in The Pennsylvania Railroad. That would drive most people up the wall—never mind that it worked out beautifully. But people don’t want to buy bankrupt bonds.”

You can read the entire article here – Walter Schloss, Searching For Value.

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