MICHEL PIREU: As investors disagree on the best advice, some broad truths hold
Losses "must always be cut", says Gerald Loeb in his book The Battle for Investment Survival. "They must be cut quickly, long before they become of any financial consequence. Cutting losses is the one and only rule of the markets that can be taught with the assurance that it is always the correct thing to do." Not everyone agrees. "After buying a farm, would a rational owner … start selling off pieces of it whenever a neighbouring property was sold at a lower price?" asks Warren Buffett in his 1987 letter to Berkshire shareholders. "Or would you sell your house to whatever bidder was available at 9.31 on some morning merely because at 9.30 a similar house sold for less than it would have brought on the previous day?"The obvious answer to both questions is, no. But what makes both points of view potentially correct is whether there is certainty a company is fundamentally sound. It is worth maintaining a healthy respect for the market’s opinion if there is no absolute certainty it is ...
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