You can’t fight “Mother Nature!” Here, the Bull is using the term to refer to natural tendencies that are always in effect. They are like gravity–omnipresent and inescapable. Sailors learn to work with the wind. Good investors learn to invest in ways that work in accordance with nature.

There are many principles to be aware of, but near the top of the list is “people are people.” As a group, people mostly respond in certain predictable ways. They are moved by both fear and greed. Being social animals, they influence each other producing herd effects. A good investor is very attuned to these tendencies and may often stand apart, recognizing extreme and unsustainable behavior and taking a contrary position. Be fearful when others are greedy and greedy when the crowd is fearful. Knowing nature, work with it to your advantage.

Companies have life cycles, just like the rest of us. It is important to be aware of this and discern where in the cycle investments are most rewarded, balanced with a commensurate level of risk. Too early and the risk of corporate failure is great. Too late and there is little reward but greater and greater risk. Nature always favors the vigorous, strong, and resilient. You should, too.

Time washes out much of the volatility driven by fear and greed and their herd effects. An adage is that markets in the short run are popularity contests, but over time are value-weighing mechanisms. An astute investor knows where each of his investments falls in this spectrum and can act accordingly. Popular ones may have short holding periods, etc.

Investing isn’t complicated, especially once you know the principles behind market activity. Many opportunities are before us. Do your analysis, position correctly, and work with Mother Nature. Stay steady my friends.

-The Lonely Bull