Thread by @flaneur_a

How to catch Falling Knives! (My Humble Opinion)

By not catching them when they are falling...by not catching them when they are bouncing back. You first ensure that the knives have hit the floor; that they're not falling, any further.

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You observe the knives bounce off the floor a few times, gradually transforming into rising arrows. That's when you start catching their tails.

Good stocks multiply over time. 20-30 % move here and there does not matter. It's better to catch them with a tailwind, rather that a headwind.

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Catching them as rising arrows, vs falling knives do two things:
1) You are saved with a lot of mental trauma to take a financial position & see it go down amidst all the negative noise.

2) You don't suffer biases like endowment effects. You don't act just on your opinions, but you act on a veridical model of justified decisiveness - assigning higher probabilities to things as they occur, rather than to things that do not occur.

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Knives which fail to get off the floor, fail to get your attention.

The stock needs to stand up and get noticed, not the other way around!

By doing this, you save a lot of time and energy.

Stock Prices, like human beings, when in trouble, look for support. Let them find support.

Strong stocks, like strong human beings, bounce back from support. A discerning eye can spot them as that happen.

Key Message:

Act, not on your opinions, but on a veridical model of justified decisiveness!

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