[quote=tapdoubt]John Maynard Keynes rendered this self-referentiality nicely when he compared the stock market to a silly competition in which the participants have to pick several pretty girls from a hundred photographs, the winner being the one who chooses girls closest to the average opinion: “It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest.[/quote]

I hate this analogy.

This is really only true in the short term. Keep in mind, you and the entire market can change your minds at any time. Also, beauty is subjective, but profitability is completely objective. Eventually, the fundamentals exert their effect on the market and those who chose the most profitable early will win.

In the long run, it isn’t about guessing an opinion of an opinon, but guessing who will be the most profitable.

Also, some companies will be profitable at different times, while the beauty of a particular girl remains constant.

The market presents an ever-changing objective value. Pretty girls present a constant value that is viewed subjectively.