Doug Kass passes on 10 market rules from former legendary Merrill Lynch strategist Bob Farrell.
- Markets tend to return to the mean over time.
- Excesses in one direction will lead to an opposite excess in the other direction.
- There are no new eras — excesses are never permanent.
- Exponential rising and falling markets usually go further than you think.
- The public buys the most at the top and the least at the bottom.
- Fear and greed are stronger than long-term resolve.
- Markets are strongest when they are broad and weakest when they narrow.
- Bear markets have three stages.
- When all the experts and forecasts agree, something else is going to happen.
- Bull markets are more fun than bear markets.
Barry Ritholtz has a more fleshed-out list here.
Bob stepped down as chief strategist at Merrill in 1992, at 60, after 25 years at the helm. If we’re doing the math right, that now gives him 78 years of market experience to draw on.