<i>> "The willingness to believe crazy things increases when it feels like the world is dangerous and falling apart."</i><p>People often overlook the socio-economic context of Tulip Mania, for example - Europe was being devastated by the Thirty Years War (60% of some populations killed), there was another outbreak of bubonic plague (people stopped showing up to the bulb auctions in Haarlem), etc. With death so close to so many, there was a sense of there being little to lose by fatalistic risk-taking.<p>The disruptions we're facing now, while they pale into insignificance, are still arguably the biggest since the Second World War.<p>But what is particularly concerning now, is the growing group of people who would rather put their trust in shady cartels and oligarchs than their governments, and the increasing numbers of people who think they have a have a vested (financial) interest in seeing their governments fail.
> Not enough speculation is as bad as too much speculation.<p>When every author of a blog is a genius, and spews such amazing pearls of non-wisdom.<p>While some degree of risk is required, undershooting gains is never as bad as losing everything, because you can continue to bet.
Author is plain mathematically wrong about how martingales work.<p>Optimism is never the "right" mindset. Better find some other way to be happy instead of believing untrue things.
Game theoretical and mathematically optimal strategies may exist, as well as ones robust to missing information.<p>FOMO is a major downfall of many an investor.
I put all my 401k into treasury bonds about a year and a half ago, for one simple reason: the market was no longer offering me rational prices for stocks. The market is trying to sell me a Ford Fiesta for 100k, and <i>I’m not buying it</i>. You can stand there and say, the value of a Ford Fiesta has gone up 10% a year for ten years, or whatever, and I’m glad that makes you happy but I don’t care. I’m still not buying a Ford Fiesta for 100k because if I’m not pulling my money out for 30 years, it doesn’t matter much what the year to year fluctuations in value are. I’m not speculating on market movements. I just want to get fair value for my money, and if nobody’s going to give it to me then I’m happy to put my money on a pile and sit on it. Eventually the market will turn and someone will offer me a fair deal, I don’t care how long it takes. I’ll take a nap and wait.<p>I know there’s a quote out there that says “the market can stay irrational longer than you can stay solvent” but that doesn’t apply in this case. I don’t need this money. It’s for later. I can stay solvent indefinitely. The market can go suck eggs. If it stays at this inflated level forever, I still haven’t really lost anything. If the cost of a Ford Fiesta goes to a million, well c’est la vie. But everyone knows that it isn’t actually worth that much so it seems like a dumb assumption to make that that will happen. Why would you just assume there’s always going to be a bigger idiot? You eventually run out of idiots and someone will come to me hat in hand and say, “...what about 15k?” and then I’ll get off my pile of money.
Of course the market can remain like this for years to come. Improbable but totally possible.<p>But imagine you are a rational individual and you look at an US centric index that tracks the total market and see that you have been in a 11 year bull market where it rose 300%.<p>Now you look at the ratio between the total market cap and the GDP (also know as the buffet indicator) and see that it's at historical highs and last time it was at this value was just before the last recession.<p>Sure... the craziness could go on fuelled by irrational optimism, negative interest rates and the feds printing money like crazy. It could and probably will for a while but is it irrational to be prepared for the potential crash?
I like the article. It describes my observations from previous BTC bubbles.<p>A point the author makes is that within a bubble, markets can turn irrational. And additionally that they can sustain this irrationality for some time.
Definitely feels like it. Both on stocks and crypto.<p>The recent move of mainstream companies into bitcoin suggests to me that it might last a while though
Diversify your speculation, I think that's the best advice, and make sure you stay grounded, ie. have a base which won't really move much relative to potential hyper-inflation.
Can someone explain to me how the title is related to the content?<p>At first I thought it was an allusion to the mythical rational markets, but the content is so staccato, cryptic and Buddhist Koan-like that I was not able to make the connection...<p>I think my attempt at understanding it is tainted by what I expected it to be. I would be greatful for clarification.
If a bubble can last "years and years", what's to stop it lasting 50 years or 100 years? If it lasts over 50 years then is it even worthwhile to make the distinction? The speculation surely will outlive you. It could become an intergenerational scheme like fiat currencies...<p>There is a point where the economy is no longer serving regular people, it's all focused on rich people. When that happens, speculation becomes the main purpose of the economy. Everyone is forced to participate in what is essentially a game for rich people... Kind of like Westworld.<p>And there is a point when the speculation is more than that. It's a scheme, it's a hack... Participants find ways to constantly bring new money into this scheme. Recruit new generations. Like a cult.<p>With a constant stream of new money entering the economy via bank loans and government spending, the economy we have today is already a centrally planned speculative scheme (having many of the bureaucratic characteristics of communism). People are either not smart enough to understand it or they have too much skin in the game to acknowledge it and it seems that the next generation won't be any different.