The problem with the stock market is the same problem in every other investment area, including Real Estate and Commodities. There are bubbles.
There were bubbles in the 1600′s when the Dutch Stock Market was way overbought on tulips. The bubble was huge and many people sold their possessions to get in. In the end, the bubble burst and the panic set in. Selling was fast and furious and fortunes were lost.
This is the cycle that seems to repeat itself over and over again. The patterns can be big and obvious, like the above tulip situation, or they can be less obvious, as in the daily fluctuations in stocks. Aren’t they just mini bubbles of demand after all?
So the problem is that when things are going up, everyone wants in. Some people will sell and make a profit before the bubble bursts. Others will miss their chance and either have to sell on the way down and hopefully not lose everything, OR they will not get the memo that things are falling apart and will lose a lot.
So, if you want to be a successful investor, then you need to understand and know how to take advantage of bubbles.
Someone is going to profit and someone is going to lose. This is similar to gambling of course. Players (investors) are relying on their skill to play a bubble properly. But no one can predict it out with absolute accuracy every time. Unless of course, they are controlling the bubble, but that is a different story.
This is the human nature part. Obviously, the real value of tulips, if there is such a thing, doesn’t really change. Instead, it is the way that humans treat their value that changes. Greed is an aspect of human nature. If you want to win in the environment of bubbles, you need to understand this nature to a greater, not lesser degree. Tricky? You bet it is!
Perhaps it is better to try and be spiritually wise than to gamble with material possessions or money? You tell me. Gordon Gecko says, “Greed is good”. No one accuses him of being a good guy though. What are your thoughts?
NOTE: this post speaks in general terms and you should seek out professional advice (or help) before taking any risks.
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Great article, thanks for posting.. interesting read.
It seems that the turn of this century marked a watershed point in history and of a new era; Not because Y2k or because it was a new century or any of the other inane clichs that lead people to dismiss the signs of the times as mere superstition or paranoia. For instance, the turn of the century ushered in reality TV shows from a few intrepid cable stations and onto network TV stations. This explosion in mainstream popularity made Andy Warhol’s visionary words prophetic. “In the future, everyone will be world-famous for 15 minutes.
Twitter: davesnape
Excellent point. and very true! I also had my 15 minutes of fame about 10 years ago. short lived, but for a worthy cause
That is an interesting way of looking at the stock market – namely, but looking at the long term history. It is said that those who do not learn from history are bound to repeat it. It is a well known adage to be sure. But how many people really bother to learn about human history – or the history of their given industry, for that matter. But knowing beyond conventional human history will give you a wise perspective of every aspect of the world.
Twitter: davesnape
Gladys. that is an excellent point, and I heartily agree with you. Thank you for making this point.
I don’t play the stock market because I am not that adventurous when it comes to losing my money. I have seen people get really angry when the stock market crashes and I have heard of people killing themselves over it. It is just another form of greed and if it is going to cause this kind of reaction in people then I don’t want any part of it.
“The love of money is the root of all evil.” It’s also the root of fraud, embezzlement, violence, murder and all kinds of other nasty things. We live in a society that makes celebrities out of rich people for no other reason but that they have money – like Paris Hilton. No wonder some people risk everything trying to make a killing on the stock market, or at the blackjack table. Riding bubbles seems much too risky for me. I’m content to let others handle the pursuit of wealth, my tastes are much simpler and easier to finance.