Investment advice

[GON]

Funny---not funny.

For anyone not familiar with tulips as an investment/ form of currency:

Tulipmania: About the Dutch Tulip Bulb Market Bubble

The Dutch tulip bulb market bubble, seen as the first financial bubble, occurred in Holland in the early 1600s, when speculation inflated tulip bulbs’ value.

www.investopedia.com

 

[Astro14]

Not really humor - @GON - a classic study in bubbles - it only seems ridiculous today, but there are many bubbles in recent times that were based on equally, uh "solid" assets...

The key points in the cycle from that article:

• Investors lose track of rational expectations.
• Psychological biases lead to a massive upswing in the price of an asset or sector.
• A positive-feedback cycle continues to inflate prices.
• Investors realize that they are holding an irrationally priced asset.
• Prices collapse due to a massive sell-off, and an overwhelming majority go bankrupt.

 

[AZjeff]

Reminds me of the Beanie Baby craze when my daughter was little and what people would pay for a $4 toy on Ebay.

 

[supton]

I remember the crazy money spent on the internet in the late 90’s. I want to say, when I hit the job market in 2000 (graduated late ‘99) the reason why it took a few months was due to the bubble burst? soured me on investing for years.

No, quick look shows it burst after I got hired at my job, so my memory’s faulty. Something else was the cause there (probably typical semiconductor down cycle). Still: had a bad impression of it back then. Worse: all this crap about AI? it’s triggering those memories. Everyone is jumping onto this bandwagon, everyone wants to show they have AI, are using AI, are going to be transformed by AI. What happens when it turns out not to be the transformative/disruptive technology like that which was driving the dot com bubble?

Last I knew, AI was not that bright. What if its ramp to maturity (thinking like and being able to replace an adult) takes as long as it takes for an adolescent to become an adult?

 

[ecotourist]

I remember the dot-com bubble very well. My friends were making money hand over fist on speculative stocks. Being a conservative investor I was making next to nothing, year after year.

I started to think that (against my better judgement) I needed to get in on this dot-com thing too.

But then I was saved by a photo in the newspaper. A young woman, who was wearing fashionable leggings and riding a unicycle, was pictured beside her apparently new Jaguar. She explained that you simply bought every IPO, waited for it to double, then sold it. My conclusion was that if it was as simple as that I wanted no part of it. A few weeks later the dot-com market crashed - and I was left where I had been all along - slowly moving forward.

My high flying friends didn't do so well. One who had sold his business and retired, literally had to go back to work again. And that's not easy when you've worked for yourself for most of your career.

 

[ecotourist]

Not really humor - @GON - a classic study in bubbles - it only seems ridiculous today, but there are many bubbles in recent times that were based on equally, uh "solid" assets...

The key points in the cycle from that article:

• Investors lose track of rational expectations.
• Psychological biases lead to a massive upswing in the price of an asset or sector.
• A positive-feedback cycle continues to inflate prices.
• Investors realize that they are holding an irrationally priced asset.
• Prices collapse due to a massive sell-off, and an overwhelming majority go bankrupt.

I agree with most of the above. The part I wonder about is whether

• Investors realize that they are holding an irrationally priced asset.

Or does the thing just collapse of its own weight. And then the negative-feedback cycle just spins prices down to zip, only faster than on the way up. There is nothing like a falling stock for investors to abandon ship en masse.

If there is no demonstrable value (like cash flow or actual earnings) how can anyone determine the value of a stock.