"[Market booms and busts are based on the psychology of excess and extrapolation and fundamental value investing uses this understanding and the principle of reversion to the mean to invest more rationally for the long-term rather than emotionally for the short-term:] So excesses and corrections: that's what cycles are about, in my opinion. Where do the excesses come from? Psychology. People get too optimistic, then they get too pessimistic. They get too greedy, then they get too fearful. They become too credulous, then they become too skeptical, and so forth. Oh, and the big one: they become too risk-tolerant, and then they become too risk-averse. "
Howard Marks
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