Mr Market Is Irrational — Use It

"The stock market is the story of cycles and of the human behaviour responsible for overreaction in both directions." — Seth Klarman

Benjamin Graham described the market as "Mr Market" — a moody partner who offers you a price every day, sometimes euphoric, sometimes despairing. You are free to ignore him until his price suits you.

Growth-oriented businesses often fall hard when sentiment turns "risk-off", even when their actual results have not changed. When interest rates rise, longer-duration assets sell off almost mechanically. If the underlying cash-flow story is intact, that indiscriminate selling can hand patient investors a better entry price — an opportunity that both pure-growth and pure-value investors can miss.

The discipline is to separate the business from the mood. A falling price is only bad news if the reason for it damages the long-term economics. Otherwise it is Mr Market doing you a favour.

Illustrative example: Meta Platforms (2022)

In 2022 the shares fell sharply on macro fears and scepticism about heavy spending on the "metaverse". The core advertising cash-flow engine, however, was still running. Investors who judged the business rather than the mood were buying into a large, sentiment-driven decline. The lesson is about distinguishing price from fundamentals — not about this company specifically.