When you’re in the middle of a mob, it’s difficult to keep your bearings. Everyone is going this way or that and soon you find that you are nothing more than the acted upon rather than an actor…that can be a scary thing in on itself.
But when it comes to the markets for tradings financial instruments, that caveat seems to get tossed straight out the window. Losing oneself in the crowd can be exciting, especially when you see that it seems like more and more people are flush with cash than ever before and everything you invest in just gets more and more profitable.
People lose themselves in profit. They cannot even stand to bear the thought of loss no matter how reasonable it is. ‘But look at this market! It’s doing so well! Look at that projection, that must mean the reality will match up right? Look at that merger on the horizon, this can only boost the capital won’t it?’ Like any relationship, when things are good, everything seems good. There’s a great quote from Bojack Horseman I especially love, ‘When you’re wearing rose-tinted glasses, all the red flags just look like flags.’ I fear we are endeavoring upon a similarly precarious journey currently.
The dotcom boom of the late 90s was based on the fact that the whole world was now a market, and there was no stopping the growth of any company…and yet growth did stop and when this harsh truth sank in, massive amounts of equity value evaporated overnight and with it, the financial system.
It seems right now as if Twitter, Facebook and Amazon, those new ‘dotcom trillionaires’ are going to keep on going forever…but sooner or later people will have to ask, ‘Where is the money really coming from? What value is actually being created? Does that created value truly match the monetary valuations made?’
Remember the lesson of paying either too much or too little attention to ratings…one bank was given an ‘A’ credit rating right up until 6 days before the financial crisis hit back in 2008…that bank’s name was none other than Lehman Brothers.
sanctum of philosophy 