“There is nothing so dangerous as the pursuit of a rational investment policy in an irrational world.” John Maynard Keynes

Lord Keynes was not alone in believing that the pursuit of ‘true value’ based upon financial fundamentals is a fruitless one in markets where prices often seem to have little to do with value. There have always been investors in financial markets who have argued that market prices are determined by the perceptions (and misperceptions) of buyers and sellers, and not by anything as prosaic as cashflows or earnings. I do not disagree with them that investor perceptions matter, but I do disagree with the notion that they are all the matter. It is a fundamental precept of this book that it is possible to estimate value from financial fundamentals, albeit with error, for most assets, and that the market price cannot deviate from this value, in the long term[1]. From the tulip bulb craze in Holland in the middle ages to the South Sea Bubble in England in the eighteen hundreds to the stock markets of the present, markets have shown the capacity to correct themselves, often at the expense of those who believed that the day of reckoning would never come.