Coffee Can Newsletter – January, 2019

As we had highlighted in previous newsletter (http://bit.ly/2QbR8Wg), it is very difficult to predict the short term because the short term is driven by investor sentiment rather than fundamentals. Investors fluctuate between excessive optimism and excessive pessimism in the short term. When investors feel positive and expect good things, they turn greedy and are fixated on not missing out on price increases. This leads to “buy at any price” behaviour which drives asset prices. At other times, they turn pessimistic, their expectations turn negative and they are excessively loss averse. This leads to “sell at any price” behaviour bringing down asset prices.