"Take a Step Back" | Market Insights

“The market can stay irrational longer than you can stay solvent.” This is a famous, at least by financial market standards, quote by economist John Maynard Keynes that often gains increased notoriety in times of enhanced price volatility. The literal meaning of the quote has to do with a short-seller who has bet against a market that he believes is extremely overvalued, only to find his timing to be way off and in the process, loses all his money as the market grinds higher and higher (shorting a stock/market means betting it will go down and carries unlimited risk of loss). The more general point that Keynes was trying to make is that timing and risk management are two of the most important aspects of any investment. You can have a well-researched and sound investment thesis, but the “irrational” market just doesn’t do what it is supposed to.