Take your medication
Jun 09, 2023
The allegory Mr. Market was originally introduced by Benjamin Graham in his 1949 book, the Intelligent Investor, to describe what he believed were the irrational or contradictory traits of the stock market. Mr. Market is what today would be called manic-depressive, with his estimate of the business’s value going from very pessimistic to wildly optimistic. The CNN Fear & Greed Index is a measure to capture the current mood of Mr Market. It is a combination of 7 indicators from market momentum, stock market strength, put-call ratio to junk bond spreads. According to this index, Mr Market is back to extreme greed and it looks like it is time for him to take his pills and be careful. As value investors, we guide our investments only by the fundamental underlying value of the businesses and ignore the mood swings of Mr Market. If anything, they create opportunities for us.