I have thought for some time now that the US stock market resembles many real life people who suffer from Bipolar Disorder. Unfortunately, there is no antidepressant medication for this stock market disorder but it can be cured by not watching the endless news (hype) put out by the various financial news shows and printed press releases. In my younger years, I enjoyed watching cable TV financial channels like The Financial News Network (FNN) which later merged with CNBC. After watching the various, so called, experts I began to fell a sense of panic about money I had invested in the markets or a sense of desperation to put more money into stocks so I wouldn't miss the train as the DOW and NASDAQ headed for new highs.
I now believe that some people are hooked on buying and selling stocks in a similar way as some folks get hooked on gambling. No one desires to lose money in the stock market, but millions of people do each year. Most folks don’t lose money simply because they pick the wrong stocks or invest in the wrong sectors, but they panic and either buy or sell too early or they lose patience with their investments and sell too soon. I saw a television commercial the other day, which showed a guy bidding on a nice piece of art, and as soon as he was successful at the auction he stood up and told the auctioneer that he wanted to sell that art immediately after he bought it. While this commercial may look silly, what is displayed via that actor is exactly what some stock market investors do every single day.
In the old days after the stock market crashed during the Great Depression, there was some good advice, which was passed out to all that would listen. That advice was to buy and hold stocks for the long run. For decades, most individual investors followed that advice, which created billions of dollars worth of investment profits for future retirement needs. However, around 20 years ago some folks decided that the stock market could be used as some type of mini Casino to earn huge profits by buying and selling high technology companies within a short period of time. Back during the mid to late 80’s some regular folks were able to profit using this method because new money was flowing into stocks on a daily basis and that new money funded their bipolar addiction to fast and easy money.
This type of get rich quick thinking should have died in October of 1987 for most investors as the stock market took a huge dive on one day and continued to drop for most of the rest of that year. I was also caught up in that 1987 rush for profits and while I was successful for a short period of time, it didn’t take long until my own personal greed and yes, bipolar stock addition caught up with me and took away my money just like most other people. I believe there is something inside of most people, which cause them to believe they are smarter than others are and able to use their brains to profit while other folks who have more experience will lose to their superior intellect. While there are those people who are in the right place at the right time, finding lasting success via this method is darn near impossible.
Maybe learning to respect the bipolar nature of the stock market is something that takes age and experience to fully understand. Back during the 1987 stock market bubble, my boss who was much older that I said that the market was going to burst and go down over 500 points in a single day before long. I listened to his advice and then chalked up his thinking as old fashion and not hip with current times. However, within a couple of months his words came back to haunt me as his opinion of a 500 point drop in one day came to be and billions of dollars worth of paper wealth from millions of investors were wiped out before the close of business one fall afternoon. That was the day I first understood how quickly years worth of profits and income could be wiped out in a stock market crash.
Hopefully, I am wiser now with age and I do know that I am not smart enough to beat Wall Street professionals at their own game anymore. I guess the only way to learn this lesson is by suffering the pain of losing hard earned money in an attempt to create wealth not by investing for the long run, but by gambling on individual stocks which have tremendous upside potential. Like the old saying goes, “what does up must come down” and in the true laws of nature most things come down much faster than they are propelled up.
Related: Stock Market Declines, Follow The Money, Boom And Bust, Finding Good Investments
Bipolar Stock Market