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The Illusion of a Timely Exit

November 16th

After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.

Warren Buffett

The fascination with high-risk, high-return investments can be likened to Cinderella’s ball. It's easy to get swept up in the allure of quick profits and lose sight of the impending pumpkin transformation. The thrill of the party has one forgetting that the clock is ticking towards midnight.

In this world of speculation, where overvalued stocks are the belle of the ball, we often deceive ourselves into believing we can exit just in time. Yet, the reality of investing is that the clocks have no hands. The precise timing of the market's 'midnight' is a mystery - a feat even the most experienced struggle to pinpoint.

The crucial lesson here is not to bank on a perfectly timed exit. Rather, we should focus on understanding the true value of the companies we invest in. Decisions must be grounded in sound financial analysis, not on the intoxicating allure of a speculative frenzy. The path to sustainable success is not about dancing till midnight; it's about knowing when it's time to leave the party.

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