 |
Maniac Investment
Let's first understand what maniac
means. According to Webster a maniac is "mad;
raging with madness; raging with disordered
intellect". You don't know anyone like that, do
you? There is a book that is still in
print today that was originally published in
1841 with the title Extraordinary and Popular
Delusions of Crowds by Charles Mackay. He
explains in rather horrific detail how people
were caught up in the madness of buying property
in the South Seas in 1720, the numismatic coin
craze of 1980 and the tulip bulb trading in
1637. You wonder how people could have been so
gullible to have bought a single tulip bulb or
land they would never see for huge amounts of
money. Could anything like this ever happen
again? I was floor trader on the commodity
exchange in 1973 when the Hunt brothers drove
silver from $2.00 per ounce to $54. That mania
lasted a few months and quickly tanked to $6.00.
I took part in that mania. I was one of the
maniacs. When it was taking place it seemed
like the thing to do and very few questioned the
sanity of those participating. In fact, if you
weren't part of the crowd there was something
wrong with you. When there is a stampede it is
best to run with the herd or be trampled to
death. However, there were a few who were not
mesmerized. Today we are participating in one of
those manias only now it is called a bubble and
still is not being taken too seriously. Yes, it
is the stock market mania. Many are still
trapped in the madness of the crowd of the
1990's who believe the "market always comes
back". They are clutching their tulip bulbs,
sorry, stock certificates, and refuse to let go
of them because they know their value will grow
back to what it was 3 years ago. Stock owners
have become mad with what - greed? fear? denial? When something, almost anything,
drops 50% in price it will take a 100% increase
in value to get back to "even". With today's
economic and world conditions that could be a
long time and maybe not in our lifetime. Years ago I heard a story about how
they used to catch monkeys. A small hole just
big enough for the monkey to slip his empty hand
inside would be drilled in a coconut and candy
and fruit would be put in it. The coconut was
tied to a stake in the ground. When the monkey
grabbed a fistful of goodies he would not let go
even when the hunter came for him. Greed holds
him in an invisible grip. Many investors today are like those
monkeys. They refuse to sell what is remaining
of the stocks and mutual funds they own even
though they can clearly see the major trend
continues down. They became mad with greed and
now fear of loss entraps them. Until this madness is recognized
investors will continue to see their portfolios
become smaller and smaller. They must learn to
let go. Written 3/10/03 but still applies today. INVESTMENT LETTER 3 month free trial.
http://www.mutualfundmagic.com Copyright Albert W. Thomas All right reserved.
Author of "If It Doesn't Go Up, Don't Buy It!"
Former 17-year exchange member, floor trader
and brokerage company owner.
MORE RESOURCES:
Google News
|
|
|
|
RELATED ARTICLES
Investing in Car Dealerships: Doing Your Homework
This article attempts to help give the investor a broader basis upon which to decide whether a dealership merits their time, money and attention.Interviewing Factories and Financial InstitutionsLenders have an affirmative duty not to promiscuously disclose the financial condition of their debtors.
Investing Pointers for Neophyte Investors
If you know next to nothing, how do you go about the business of investing? The first thing you need to know about investing is, how much do you really know? If its' not much, then you will need to read extensively to educate yourself.To become well-informed, you should read up on the basics.
Guru Focused: Robert Olstein's Short Sells
While it is rather rare that value gurus sell stocks short, Robert Olstein has been selling short in his Financial Alert Fund. The accountant-turned fund manager spots values by looking behind the numbers.
The Biggest Oil Opportunity in the World - And How You Can Profit From It
Where is the second biggest deposit of oil reserves in the world?In the oil sands region of Alberta, Canada. Oil sands are a thick, viscid mixture of bitumen, sand, clay, and water.
It's Never too Early to Start Investing!
Remember the old saying, "never too late to start"? Well, try this on for size: when it comes to investing, it's never too early to start. Time really is of the essence here.
Powerful Options Basics Lessons Improving your trading in 180 days.
An option is a traded security that is a derivative product.By derivative product we mean that it is a product whose value is based upon or derived from the price of something else.
Waiting 20 Years Can Cost You Millions - Dont Wait Start Today
Many Young people live for Today. They really don't fully understand the power of compound interest.
Trading Tips No 7: Developing a Casino Mentality for the Day Trader
I submit that the successful day trader would profit well to adopt a casino mentality. At first glance, this sounds reckless and nothing more than a gambling attitude - but it's not.
Stock Market Leaders and Laggards
Leaders are stocks that breakout immediately when the market confirms a new rally. In the first several weeks, strong stocks with leadership ability will breakout on volume above their 50-day average.
The Realities Of Market Timing
Market timing systems are based on patterns of activity in the past. Every system that you are likely to hear about works well when it is applied to historical data.
Making It Second Nature
Not long ago I was laying on my son's floor throwing one of his toy balls back and forth in the air to myself and I had a strange revelation. I noticed that as I threw the ball up in the air my left arm automatically started to move to where the ball was going to come down.
Brain Snappers and Other Wall Street Nonsense
The last time you spoke with your broker did
he use any of the following words? Diversification,
Price-to-earnings ratios, discretionary trading,
lifting a leg (he's talking to you not your
dog), leverage, divergence, fee-based
compensation, escalator clause, tactical asset
allocation and other mesmerizing words to place
you in stupefying shock.Brokers do that to let you know that you
don't know anything about the market and you must
allow them to make decisions for you.
Shareholders Meeting Changing With Times
A significant number of corporations that settled accounts in the past year are ready to hold their annual shareholders meetings.In this year's meetings, more than 300 companies plan as their main focus of attention defense measures against hostile takeover bids.
Diversify!
The best way to avoid being hit hard by a stock market crash or another Enron/Worldcom fiasco is to make sure you don't put all your eggs in one basket. Diversification helps ensure steady growth of your net worth as you accumulate more assets.
An Old Dividend Stock Investment Idea, for a New Generation
Death and taxes! The certainties of life! And then, of course, there are the mortgage payments, the utility bills, phone bills, the car payments and thirsty automobiles. Add that to the grocery and clothing bills, and there appears to be more then just death and taxes as certainties of life.
Coca-Cola - A Value Stock?
There has been much talk lately about Coca-Cola and its potential as a value stock - as it now spots a dividend yield of 2.6% (which is the highest dividend yield since the late 1980s) and a P/E or less than 21 - right at the bottom of its five-year low.
Caveat Emptor: You May Owe Taxes Despite 401(K) Losses!
One among many ways you lose money in non-indexed mutual funds is the tax trap. You may have to pay taxes even when your mutual fund loses money! To many people this is painfully unexpected.
Missleading Fund Names Wreak Havoc On Investor Returns!
Mutual fund managers use fake fund names to part you from your money such that you cannot judge what a fund does by its name. Many funds have names that are outright misleading or even deceptive.
Investing and Asset Allocation
Sometimes you spend sleepless nights worrying about which stocks to buy and which to sell, which funds to own and which to dump and whether to get into bonds.All of these are legitimate concerns, but the greatest determinant of your success as an investor will not be your sagacity in selecting specific stocks, bonds or funds for your portfolio.
Just what is Arbitrage Investment?
In the simplest of terms, Arbitrage means to exploit price differential.Usually it meant looking at differing sources of an investment, and if there was a price difference between Source A and Source B - then the investor / dealer / broker / manager would buy from the lower priced source, and sell on the higher priced source.
|
