behaviour
Markets can stay irrational
The rule
The market can stay irrational longer than you can stay solvent.
Where it flips
This maxim is not an excuse to drop every early conviction. Sometimes patience is exactly the edge. The real question is whether you can survive being early, not whether you are willing to be.
Keynes's line reminds you that being right about value tells you nothing about when the price will agree. A correct call made too early can still wipe you out before it pays off, especially with borrowed money or a fixed deadline. So position for the view, but do not bet on its timing.
A worked example
A reader judges a hyped Indian small-cap wildly overpriced, and takes a borrowed position against it. The stock doubles again before it finally falls. The margin call arrives long before the view pays off. [illustrative]
How to spot it
- ·a correct view held on borrowed time
- ·borrowed money bet against an unpriced view
- ·a hard deadline on a slow idea
- ·position sized as if the timing were known
John Maynard Keynes · attributed maxim