I love Mr. Market. He is described in the great investment book "The Intelligent Investor".
On one day Mr. Market is down in the dumps such as that he will sell his company for way less than it is worth. The next day Mr. Market is ecstatic and he wants to sell his company for way more than it is worth.
While I do believe the efficient market hypothesis holds in the long term (It says that the market reflects all available information), in the short term, it is clearly wrong. If you want to be a value investor, you have to believe the market is not efficient in the short term.
Take Advanced Automotive, several years ago they made a huge acquisition of General Parts International. Mr. Market got all excited and pushed it up to almost $200/shr. Knowing that the integration would take several years, I didn't get too excited. Then, a few months ago, Mr. Market become depressed and kicked it down to $80/shr. Today, AAP had really good earnings and the stock is up 18%!
I love Mr. Market because he creates great opportunities. The lesson is that you should judge companies based upon their operational value not what Mr. Market says.
I hope Mr. Market's doctor doesn't prescribe lithium. It would destroy great opportunities to profit!
