Why we people believe it wiil all be different.
Okay, so for my Graduate program project in Psychology I choose to involve my hobby of investment in the stock market. I wanted to figure out made create the next hot sector. Looking over the statements of people who were invested in the Credit Default Swaps and stocks involved with banks & investment firms, I quickly found my answer. The problem actully starts with the bursting of the bubble. Once the bubble bursts people try to save as much of their money before lossing it all, the basic action of wanting some money and saving some pride instead of lossing all the money along with your pride. Feeling stupid for investing in such a risky sector of the market, they look for the sector that they will be the safest against any crash, bubble bursting or even depression. Remember, a person is not thinking clearly after lossing money, which creates the need to have safety even if the threat is not physical but rather emotional/intellectual. This is what happened with telecom stocks. When the telecom stocks tanked and a lot of people lost money in AOL, MCI & many other famous failures, people instantly went searching for safe investments. People assumed that Financial stocks were the safest since they have skyscrapers full of smart people, tons of capital and hand out only mortages to people that of the highest quality. People who invested in Financial stocks still believed those ideas till the day they lost eveything. Now the same cycle starts over again. So the next time you start hearing how so & so sector is the safe and there is no way of it failing, caution cause that will be next AOL, Citigroup or possibly Enron.
uh, you're findings are pretty fucking stupid/wrong/elementary. I broke your paragraph down into 6 points.
"The problem actully starts with the bursting of the bubble."
"Once the bubble bursts people try to save as much of their money before lossing it all"
"Feeling stupid for investing in such a risky sector of the market, they look for the sector that they will be the safest against any crash"
"Remember, a person is not thinking clearly after lossing money"
"People assumed that Financial stocks were the safest since they have skyscrapers full of smart people, tons of capital and hand out only mortages to people that of the highest quality."
"So the next time you start hearing how so & so sector is the safe and there is no way of it failing, caution cause that will be next AOL, Citigroup or possibly Enron."
webvan, pets.com, and e-toys would be better companies to cite if your studying bubbles. How are/were Citi and Enron part of a bubble? I'm stupid please explain..
wtf school do you go to? Kansas state?
some books you should look into
pwned
seconded
Unfortunately, your understanding of the markets, psychology, and the english language are all much lower than that of the average user of this website. Are you really a graduate student? Do you think lossing is a word? Really?
Wow this is a great piece. You should PM deightrader. You both have amazing insights to the market.
Thank you for the book list, I will be sure to check it out since I am not a business student and crowd psychology is an intresting aspect of business. But I quickly noticed something interesting after a pyschoanalysis of your posting. Instead of making a counter-point towards my theory. You were making counter-points and insults towards me. This usually signals a person who is displaying an emotions usually rooted in the fear. A person will resort to those emotions when their belief system is put into question or when there is a argument against their belief system. :)
LOL.
your points are so vague and retarded they can't be countered.
Financetherapist, psychology is a bunch of bullshit that no one buys into. You want to psychoanalyze people? Start with yourself and ask why are you wasting your time and life in an industry that is largely laughed at.
BTW, way to use a red herring in your rebuttal to the NewYorker. Typical psychology student, all you do is deflect.
fifth fifth-ed? fifthed-ed?
Kids - I am afraid all of you who are poo-pooing the OP are the ones that are deeply deluded. This comes from someone who has been in the markets for a few years (admittedly I am not a trader but I have family and friends in AM and S&T). The OP may be written poorly but there is nothing wrong with the general thesis.
Oh, and whoever thinks Citi was not part of the bubble really does need to remove their pea brain from out their ass and get real. WTF was Citi and the rest of the BS synthetic toxic credit shit if not a fuckin bubble???
what is this bubble you speak of? and where can i find this "BS synthetic toxic credit shit"?
"admittedly i am not a trader, but I have family and friends in AM and S&T"
"this comes from someone who has been in the markets for a few years"
'BS synthetic toxic credit shit"
LOL on three counts.
sounds like you, deightrader, and the OP should get together for tea and discuss your market insights. mb start a blog so you can keep us updated.
How is enron a bubble? It was called FRAUD. Are other illegal acts considered 'bubbles" too? I guess O.J. Simpson murdering his wife was another bubble.
I don't agree with this. A bubble is an overvaluation that gets suddenly exposed and bursts. Given that definition, enron equity was certainly overvalued and when news of it's scams got out, equity price plummeted.
Being the New Yorker is the new killing it!
New Yorker. Care to actually explain your position on this? Do you actually know why, for example, Citi is the shit show it is? Apart from what your friends have told you? Do you actually have a fuckin clue?
Let's discuss the concepts champ...
By being in the markets means I do actually work in the industry. So undergrad heros, wanna come debate? You sure wouldn't get past interviews with my team if you don't understand the simplest shit for what it is...
My position on what? What are we debating? I have no insights, I'm only a monkey.
New Yorker - sarcasm intended or not, internalise your last comment ;-)
Psych majors are most insecure. EOM http://sg.wsj.net/public/resources/images/MK-BG695_SATISF_NS_20101010180444.gif
Very true, how can you be satisfied with a job(which you most likely wont get) that doesn't pay you enough money to move out of your parents house at age 30
^Exaggeration.....Slightly
Great posts NewYorker!!!
Schmucks.... I hope you all end up at Citi
would sure be an upgrade over your shithole of a firm
Sure Abovethebellcurve.... you keep living that undergrad dream....
So basically in the end I'm right. :)) Thanks guys.
OP: Here is your reading list:
The Quants Chain of Blame Too big to Fail On the Brink Fool’s Gold An undergraduate Derivatives textbook
Couple notes The problem actually starts long before the bubble There was no bubble in CDS (They were underpriced. Do you actually know what a CDS is?) The root cause of the financial crisis was not a bubble in financial stocks People didn’t seek safety in financials after the tech crash
There were some psychological aspects in the mortgage bubble & financial crisis but you have missed them because you don’t understand the underlying economics.
You did make some good points: regret, pride and fear factor into investor behavior.
in very simple terms, the bubble was the housing market (mortgage values). cds's are like a type of insurance against people defaulting on their mortgages, and they were very very undervalued (so you pay a premium for this "insurance" and in the event of a default, you get payed out). then they had synthetic cdo's, which were based off the credit default swaps. theres a whole bunch of other factors involved. if you want one book that sums this up pretty well, i'd suggest reading too big to fail. feel free to correct me, but thats my understanding of it in simple terms.
Sweet, thank you Buyside and Chronic for the info and the book list. What do you guys recommend for Options trading. FYI, I don't know anything about Options. Votra Sante!
LOL. Actully there ABACAB. I paid for all of my university undergrad by myself. I invested in stocks & shorted. So all of it came from invested and not a penny from my partents. :))) Second, I actully like to helping people, but I don't like the sight of blood. So I will be happy in the end. And third, I actully rent an room in town house near my university :P . pwaned!
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