[This is a repost of a January 2008 post. Even if you have seen the video before, I am sure that you will appreciate it even more now since it rings so true.}
The other day, a BBC producer from London called me up and asked me if I would care to comment on the recent big sell-off in the Indian stock markets. I confessed that I am not fully qualified to do so but added that in all honesty that my guess would be as good as any one else’s. Still I declined. The best we can do is pull out Keynes’s “animal spirits,” which unfortunately is not amenable to rigorous scientific or economic analysis. The essential story of the stock market is well told in this cartoon.
That pretty much sums up how the stock market swings between fear and greed, the abrupt change from panic to irrational exuberance. And here are The Long Johns (John Bird and John Fortune) on turbulence in the financial markets. As one of the Johns so astutely observes, “You have to remember two things about the markets. One is, they are made up of very sharp and sophisticated people. These are the greatest brains in the world. The second thing you have to remember is that financial markets — to use the common word — are driven by sentiment.” I won’t spoil the fun for you. Just watch the video and fall off the chair laughing.
That’s why I don’t mess around in the stock market. 🙂