A Blind Corner is a turning where you cannot see what is ahead. Blind corner is also applicable to the world of investments, where you do not really know what is going to happen tomorrow. This makes investing a Blind Art, where you need to take educated guesses on what can happen tomorrow. Successful investors have mastered the art of educated guessing or are just plain lucky or both.
In the Blind Corner Blog, i will be talking about a wide variety of subjects, maybe not all pertaining to investments but relating to your life in particular your investing life.
Comments are welcome.
Transcript of Podcast:
“Irrrational Exuberance” is how the former Fed Chair Alan Greenspan described the stock market rally of the late 1990’s, a few years before the dot.com bubble burst. Greenspan felt the market was behaving irrationally at that point of time, though the hundreds of thousands of participants who form the market did not think they were behaving irrationally, in fact they were behaving rationally in their line of thought.
The majority who voted for Brexit, who voted for Trump, who voted for other political leaders who according to rationalists, did not deserve the votes, did not behave irrationally, in their own minds they were rational.
You come across every day instances where individuals, especially highly literate individuals, getting conned out of their money by so called scamsters. Godmen, cult leaders and other such types who get individuals to give huge donations for no worthy cause. Fraudsters get individuals to provide bank details or card details and hack their accounts. Ponzi scheme runners garner huge money from individuals promising them out of the world returns.
What makes people part with money for a lost cause, when they will not give a single cent to a worthy cause or to the deserving or even to a good financial advisor? Again the rationalists will question the judgement, which in hindsight is irrational to the conned but in their own minds they are thinking that they are behaved rationally.
The investing world has plenty of so called irrationality. Individuals will ignore highly prominent growth stocks and will instead try to find obscure penny stocks, which will invariable lose them money. Investors will prefer high cost products that they do not understand to low cost products that will give better returns. Trading in derivatives, which is high risk, is seen as better than investing in stocks, which will give better returns at a much lower risk.
I find investors prefer to pay high fees, which is not direct or is hidden, to pay low fees directly for good financial advise.
What looks irrational, is rational to the numerous individuals who take the so called irrational decisions.
There is a whole industry out there that rakes in money from so called irrational decision makers. However the question is, should you point out the irrational behaviour as in your judgement they are irrational but in their judgement they are rational. After all its their money and their life and who are the so called rationalists to question them.
An individual throwing money into a river believing it will feed the fishes will just turn around and say “I’m throwing my money and not yours” if you try to rationalise the act.
The world will continue to be awash with irrational acts and rationalists will have to take that into account when making their own decisions.
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