Graham asked his readers to picture owning a small share of a private business with a partner called Mr. Market. Every day, Mr. Market names a price at which he'll buy your share or sell you his. Some days he's euphoric and names a silly-high price. Other days he's despondent and offers to sell for almost nothing.
The point: you are never obliged to trade with him. His offer is useful information about his mood, and sometimes a gift. It says nothing about what the business is worth.
What the research added
Decades later, behavioral economists measured the habits Graham described:
- Extrapolation. Investors project recent trends too far forward, so glamour stocks get too expensive and unloved ones too cheap (Lakonishok, Shleifer & Vishny, 1994).
- Loss aversion. Losses feel about twice as painful as equal gains feel good (Kahneman & Tversky). So people dump falling stocks and avoid anything that has hurt them recently.
- Career risk. Professional managers are judged quarterly, so owning an ugly, out-of-favor stock is dangerous for them even when it's cheap. That keeps it cheap.
Why rules help
You are Mr. Market too, on your bad days. The simplest defense is a written rule decided in advance — "buy when X, sell when Y" — and the arithmetic on paper when the headlines are scary. That is the reason every strategy here is a fixed, published rule, and every match shows its numbers.
Educational content, not investment advice. Past performance — of people, papers, or backtests — doesn't guarantee future results. Do your own homework before buying anything.