Market Entry / Exit

The famous oracle from Omaha, Nebraska always claims that timing the market is impossible, and that the real or only importance is finding value, then seizing the opportunity. He goes a step further in some articles that one should not worry about market timing at all.

These strategies are sound, but not holistically. #1, finding value is the most important aspect of acquisition or development. #2, yes, it is impossible to time the market correctly, and it is not possible to predict the future or future equilibrium. #3 but disregarding market trends, imbalance, or equilibrium (present or future), is hardly what Berkshire Hathaway lives by. #4 -the famous quote of Buffet that is not included in the same topic is his “be fearful when others are greedy, and greedy when others are fearful”. This eludes to the old adage regarding marketing cycles, bullish vs. bearish sentiment, and market timing.

It also relates to the laws of kinematics and statistics. Although markets are not purely scientific or rational, kinetic energy and potential energy are relative to markets in boom periods and busts. When markets go into a bubble, they usually contract beyond long term equilibrium, creating undervalued positions long-term, while short term they appear undesirable. Likewise, in boom periods, market entrance or activity appears to be an opportunity lost if not pursued, and arbitrage in the short term. However, in the long term, entrance into a boom period will acquire or establish over-valued positions, that bring about write-offs or losses in the long term, and under debt or heavy leveraging, further catastrophic losses.

What does the discussion of market entry & exit lend to? Analytics. And not the coffee talk of MSNBC or even the objective studies of the WSJ or Economist, sometimes complex and others really simple. In the end, the pen is mightier than the sword, and market timing is critically important, as an organization and its investors with finite resources, must continuously evaluate their options, opportunities, and next moves.