Mr. Market vs Mr. Value

Interesting interview with Charles Ellis, author of Winning the Losers Game, on the Bob Brinker program a couple of weeks ago. I’m not familiar with this guy, but after listening to him I think an investment in his book would be well worthwhile. I Loved the conversation the guys had on Tulip mania and the Dot Com mess. It seems the Dot Com mania was even more speculative (read: ridiculous) than the Tulips. Ellis concluded: “It’s very embarrassing looking back on the Dot Com situation … there is no rational explanation that would hold up under any kind of serious examination.” Ellis was saying that as speculative as the Tulip situation was, there were, in fact, some reasons to explain what happened, whereas with the Dot Com bubble there were absolutely none.

The best part of the interview, though, was when Ellis spoke about spending some time with Ben Graham and how Graham always used to tell investors to be careful to separate two different types of people — Mr. Market and Mr. Value. Mr. Market is the loud mouth guy always jumping around in front of you try trying to sell you something (anything). He’s always trying to draw your attention away from your holdings and on to the market. Mr. Value, on the other hand, is the guy who is really rather boring … he’s just a workhorse slugging it out day after day after day and consistently improving by tiny increments. Mr. Value is the guy who really built the economy, and he’s the guy to listen to.

Who do you listen to, Mr. Market or Mr. Value? I’ve been under the influence of Mr. Market for too long on a variety of issues, so I’m no longer listening to Mr. Market.