Barry Ritholtz's ten suggentions

http://www.ritholtz.com/blog/2010/04/10-thoughts-on-psychology-valuations-adapative-investing/#comments

1. Whether a premise is fundamentally true or false is irrelevant as to whether it is actionable. If enough fools believe something is so, it will impact the markets.

HL: 1. Never fight idiots. Learn to love them

2. Valuation/fundamentals can not be used to trade short-term. Market can remain irrational (overvalued/undervalued) for much longer than I can remain solvent. This reflects my own overconfidence bias

2. Always be conscious of the cognizant biases and selective perceptions you bring to investing. Recognize the same bias in the crowd, the media, and Wall Street. Avoid the herding effect.

HL: How I leave my own bias out of the door when I analyze and invest?

3. After a a 55% market sell off, most of the terrible structural news that existed before the collapse is reflected in prices. (Let it go).

HL: Do not agree. Maybe I do not understand why he says this? Is he a long-biased since he is a money manager, being paid by long/in the market?

4. You must acknowledge when the data gets stronger or weaker, regardless of your current market posture. Be skeptical, but not rigid.

HL: When facts/data changes, I change my mind

5. Variant perception is a rarity; Identifying the moment when the crowd figures out they are wrong is rarer still.

HL: Hard to call top when idiots figure out they are wrong?

6. Market Pros simply cannot afford to sit out a 75% rally; Individuals that miss that sort of move should reconsider their investment strategies immediately.

HL: Money manager's career risk of not being long. So, they have long bias

7. Every thing cycles: Recessions turn into recoveries; bull markets give rise to bear markets. Every rally that there ever was or there ever will be eventually ends. Adapt to this truism or lose all of your money.

HL: We know market cycles, but it does not help timing

8. One of the hardest things to do in investing is to reverse your thinking. It is even more difficult to do after a certain approach has been successful for long time. The longer the period of successful thinking, the more importnat the reversal will be.

HL: Reverse according to what?

9. Cheap markets can get cheaper; Expensive markets can get dearer.

HL: Buying cheap according to value-investing is still a better strategy, collecting dividend, even it get cheaper and cheaper than short a overvalued market in which expensive markets gets dearer to wipe short out for its leverage.

Wally (from BP): Contradictory things (refereing to 6 &9) . The difficulty is that the first thing – a big rally – can only be identified after the fact. If you put your money into what was instead a ‘cheap market’ that got cheaper, you’d be toast and you wouldn’t be around later talking about the big rally. The hardest thing in investing is to look back and identify what you really “knew” as opposed to what you lucked into.

10. The markets frequently diverge from the macro economic environment. This can be both long lasting and maddening; Your job is to be aware of how wide the gap between the two is.

HL: See 1.