After the article "Bitcoin Makes History, Ethereum Creates the Future" was published the day before yesterday, a reader left the following comment:

“In the bull market from 2024 to 2025, Ethereum performed poorly. The market is always right. In the next bull market, Ethereum may not have anything to do with it.”

In my understanding, this comment mainly expresses two viewpoints:

First, judging that Ethereum has no prospects for the next round based on its price performance in 2024-2025.

Second, the core basis for the above judgment is: “The market is always right.”

Regarding the first viewpoint, long-term readers of my articles know that a short-term price performance of an investment target has never been my standard for judging whether it has long-term investment value and potential.

Any method that uses only this short-term price performance to judge long-term investment value or potential is, in my opinion, speculative.

As for speculation, I have shared multiple times that I believe there are people in this world who can succeed and do exceptionally well—geniuses or exceptional talents. But it does not suit me, so I do not follow this kind of logic or methods at all.

The understanding of "the market is always right" in the second viewpoint is what I want to particularly share in this article.

Let me state my direct conclusion:

The phrase "the market is always right" actually roughly confuses two completely incompatible situations, and in many cases, misleads many people.

The phrase "the market is always right" was once very popular in our country, especially in the 1980s and 1990s.

At that time, this phrase was widely circulated to break people’s fears about market economy and the inertia of thought regarding planned economy.

What it aimed to express was:

In terms of the pricing mechanism of goods, the efficiency of the market mechanism is far higher than that of the planned economy.

A very important point within this meaning is:

It emphasizes pricing efficiency and correction mechanisms, rather than emphasizing that market mechanisms always price correctly. Its key meaning is that under the market mechanism, even if there are deviations and errors in the pricing of goods, they can be quickly corrected through self-correction mechanisms.

Whereas the planned economy finds it very difficult to achieve such efficient correction and adjustment.

However, as this phrase has spread, it has been misread to mean that the market's reaction is always right.

This type of misreading is the first kind, and the following second "understanding" has spread even wider. This “understanding” is what I mentioned earlier:

“This phrase actually roughly confuses two completely incompatible situations.”

This brings to mind the phrase Mr. Buffett has repeatedly mentioned to the point of everyone hearing it so much that it has become a cliché:

“The market is a voting machine in the short term, and a weighing machine in the long term.”

The core meaning of this phrase is:

The short-term fluctuations of the market are primarily driven by market sentiment and group psychology, and not by the real value of companies; prices may significantly deviate from inherent value.

As time passes, stock prices ultimately reflect the actual value of enterprises, such as profitability, cash flow, and asset quality. Value will ultimately pull prices back on track like a weight.

In simple terms:

Short-term pricing by the market often cannot correctly reflect the intrinsic value of an investment target, but long-term pricing can almost accurately reflect the true value of an investment target.

Here, the two situations reflected by the market's short-term pricing and long-term pricing are two completely incompatible situations.

So when I say “the market is always right,” it refers to the confusing of these two completely incompatible situations.

I think a more accurate statement would be:

The long-term pricing of the market basically can correctly reflect the true intrinsic value of the investment target.

There is an even more popular saying in the U.S. about “the market is always right,” which is “the market is always efficient”—meaning the market price reflects the intrinsic value of companies.

Mr. Buffett and Mr. Munger have repeatedly emphasized in their shareholder meeting transcripts that they do not agree with this viewpoint; if the market were always efficient, they wouldn’t be able to make money. They can earn profits precisely because they can repeatedly find when market pricing fails, identifying investment targets that are significantly undervalued by the market and buying them aggressively.

From 2009 to 2021, Nasdaq went through a robust bull market.

In that 12-year bull market:

NVIDIA entirely ignored the lackluster stock price performance from 2009 to 2012, persistently pushing forward the iteration and development of CUDA. Jensen Huang firmly believed that NVIDIA's graphics cards were not limited to gaming and could potentially be used in broader fields. To realize this potential, he had to fully commit to promoting CUDA.

If we follow the logic above:

2009-2010, in the Nasdaq bull market, NVIDIA performed poorly; the market is always right. In the next bull market, there may be nothing for NVIDIA.

2010-2011, in the Nasdaq bull market, NVIDIA performed poorly; the market is always right. In the next bull market, there may be nothing for NVIDIA.

2011-2012, in the Nasdaq bull market, NVIDIA performed poorly; the market is always right. In the next bull market, there may be nothing for NVIDIA.

Later, as the Nasdaq continued the bull market, we all saw what happened with NVIDIA.

Are there not many such cases beyond just NVIDIA?

Facebook (Meta), AMD, Tesla, and today's rising star Palantir have all experienced downturns during the overall market uptrend. But during these downturns, their fundamentals not only did not weaken but instead continued to strengthen, ultimately proving with tangible performance that the market's previous pricing of them was indeed wrong.

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