Filter THIS! The *lesser* fool theory.

Today”s filter is… The lesser fool theory.

We”ve all heard of “the greater fool theory.”

The idea is simple. Basically, value is determined by what one buyer can fetch in selling to another. No three-letter accredited fundamental or technical analysis needed. Simple.

Maybe. Maybe not so much.

Notice what is implied, that there must be a buyer before the greater fool buyer. A “lesser fool,” as it were. Not the actual producer, but another buyer in the chain of custody. That”s where things get difficult.

Never will any sale be perfectly informed. Every transaction accepts some type of risk, to some degree or another. The buyer”s most obvious risk — finding someone to buy higher — isn”t the only one. He might have paid a little less by waiting a little longer, his capital might have been better used elsewhere, etc.

Like a lot of theories, “the greater fool theory” is pretty simple… in theory. It starts getting a little difficult in practice.

We can never hope to always possess perfect information in every decision we make. So, we can at least try to limit each decision”s risk. Patience and stinginess can be virtues in picking our trades. But they might only serve to limit our losses if we”re not quick to recognize when greater fools are becoming scarce.

Informing our decisions with a little professional opinion here and there can be virtuous, too. No matter how simple the greater fool theory, its biggest challenge is in not being the greatest fool.

Filter THIS! …is a pre-open missive that tells you one thing, the most important thing, if you had to filter your view of today”s marijuana stocks price action through just one thing — okay, sometimes two — what would that one thing be?