Insanity
and Madness in the Market Part 1 The All-You-Can-Eat Buffet Greed
is a bottomless pit, which exhausts the person in an endless effort
to satisfy the need without ever reaching satisfaction. I Can't Believe I Ate The Whole Thing I heard a story last night about two large lines forming for a midnight buffet on a cruise ship. Both lines were so long (at midnight!) that the waiting time was something like 20 minutes. The story was that this one couple stood in the line for 20 or so minutes, and, when they got to the buffet, they were told that they had been standing in the line to be photographed with the buffet. The other line was to eat the buffet. So, since they had waited so long they decided to get photographed next to the buffet. THEN- they stood another twenty minutes in the other line to actually eat the buffet. Can there be anything farther from idiocy than paying thousands of dollars to go on a cruise to have photographs taken at midnight in front of the buffet? Wait-- maybe that's not so crazy after all. Maybe it is a reflection of the human personality that first takes in as much as possible, both visually and through every other sense, then decides that all of this must be consumed. It doesn't matter what it is. The quality of the food in the buffet is meaningless, but the quantity is everything. After all, if the food is all laid out on the table, you might as well eat as much as you can because there will certainly be something there that you like. Or maybe you won't, but at least you have consumed as much as humanly possible, and that's what it is all about. The
miser and the glutton are two facetious buzzards: one hides his
store, and the other stores his hide. Have you ever noticed how people act when they are at buffet? Their behavior changes all of a sudden. They can eat all they want for one price tag (or even "free" as in the cruise ship analogy). They will fill their plates, as many times as possible with little or no regard for the quality of the food. It is, after all, there to be consumed, and human beings are experts at consumption. To add insult to injury, most of these people will feel physically worse after they have gorged themselves indiscriminately. The initial feeling of elation on seeing all that food, and the transitory pleasure from chewing and swallowing soon gives way to regret, remorse and the search for antacids, the bathroom, or just sleeping it off. They load their plates, with fried biscuits, fired chicken, hamburgers, pizza, fried potatoes, and all manner of fried, greasy, high carbohydrate and sugary food. They mix all this toxic junk together in their quest to make sure they get more then they paid for. The funny part is that they all did, not only did most of them feel extremely uncomfortable a bit later as a result of over stuffing themselves, but a lot of them suffered from stomach problems as a result of the stress placed on their digestive tract. Lets not forget the long-term health consequences of doing this on a regular basis. High cholesterol, obesity, digestive disorders, diabetes, degenerative disorders of the organs, hypertension, autoimmune diseases, and so on. All will be forgotten tomorrow and the consumption can begin anew. This is about taking extreme pleasure in the moment with little or no thought of the potentially devastating consequences if such behavior is a life style (which it is for countless people). All too rarely, an individual appear who sees the buffet, recognizes it for the come-on that it is, and takes the time to scour for those particular food which will actually nourish their bodies in a positive and healthy manner, instead of filling up their addiction with anything and everything--just because it is there and tastes good and feels good in the mouth and down the esophagus to the stomach. Such select and evolved individuals take the time to look around and choose healthy nourishing food. They are the people who eat to live, not vice versa like the masses. They will choose Sirloin steak being slowly grilled, or some prime rib, or grilled Salmon. What about that Salad bar, packed with all that healthy natural vegetables and with a plethora of salad dressings available. Let's not forget the fruit bar. Now let's apply this analogy to the investment arena. Don’t we like pigs and idiots instead of studying the markets and assessing our situation, simply just jump in and do the following: 1) We either start to buy as many low priced stocks as possible and assume that a few of them will hit it big; 2) Or, we select at random a few so called top-notch companies, because everyone (all the wall streets penguins are pumping it) is saying it’s a good a buy and so we just load up on it. Just like the way we chose to attack the buffet with no plan whatsoever other than to stuff ourselves like pigs that had not been fed for a week, we chose to repeat the same mistake here. Instead of eating hamburgers, we stuff ourselves with worthless pieces of paper that represent these companies. We have no idea what they make or even anything about the internal structure and function of these companies. We do not know if they are cooking the books, or lying to people, to what ends they are going to beat the street by a penny We simply buy because it looks good, feels good, and we want to get as much of it as possible before the price goes up. End result like the buffet the experience is painful. Unlike the buffet, which just cost us about 10 bucks, this experience costs in the thousands or more. And then what do we do? Yes we look for another buffet. It is very interesting how we chose to use the word cooking the books to describe fraud. Why not manipulating the books. It is perhaps that subconsciously we revolve our whole life around the pleasure pain principle. Look a the buffet, how many times we have promised ourselves that we will not stuff ourselves again. But as soon as we heal and the pain is gone, we are ready to repeat the whole process again. The same can be said for our stock investing style. We get burned to a crisp, yet as soon as we heal, we are willing and ready to get fried to death again. Insanity is often described as doing the same thing over and over and expecting different results. If you keep doing what you are doing, you will keep getting what you are getting. In the markets, bears make money, bulls make money and pigs get slaughtered. In life, pigs get fat and lazy and sick, yet they keep swallowing slop. Our investment style is usually representative of our lifestyle. Live and think like an idiot and you will invest and reap the rewards of a moron. We were definitely not all created equally. That is why idiots were made to remind us what happens to those who stop thinking. The
wish to acquire more is admittedly a very natural and common thing;
and when men succeed in this they are always praised rather than
condemned. But when they lack the ability to do so and yet want
to acquire more at all costs, they deserve condemnation for their
mistakes. I would like to thank Janice Dorn, M.D., Ph.D. for all her assistance in the above article. She will be working very closely with me in all the articles we publish under the Insanity and madness in the market series. Her input has and help has been invaluable, especially when one considers her rather impressive credentials: Diplomate,
American Board of Psychiatry and Neurology
Bio and Archive The
Piper I remember as a young fellow a story my parents told, and it can be related to the markets. When we begin we all have plans for riches, we feast on thoughts, we are eager for results, we check the screen every day, we are bloated with self-importance. It is a panacea of bliss. We have looked from all angles; there is a killing to be had. We know it all. The people of the little town of Hamlin knew it all too. Cheapskates. The story ends with worse than indigestion. Hamlin was a lovely little town, a prosperous community, but the people's greed and lack of knowledge about themselves was their downfall. They went after the fast buck, they thought they could save on costs and hard work. Cheapskates. This little town put on a banquet; the problem was that the visitors were not welcome. Sure there were a lot of diners that did feast. The diners were enticed by the promises of sloth. The people of the town of Hamlin forgot that riches do not come easily and they slackened in their efforts. They let the trash build up. They forgot the lessons learned. Cheapskates. The diners were a plague of rats, the rats got fat by feeding on the stupidity of the people. MMMmmmmm.??? Well everyone got together to see if they could sort the problem out. They came up with the Piper. The Piper promised to rid the town of the rats. Which in due course he did, and everyone was happy. No more rats. No more problems. Cheapskates. Well in their wisdom they neglected to do something important. Something we all know we must do. They neglected to "Pay The Piper". Cheapskates. More later. Alan Lunt © 2004
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