An Investment classic published in 1852.
People like crowds. The bigger the crowd, the more people show up. Small crowd, hardly anybody shows up. -Gallagher
With Gamestop, Tesla, and Bitcoin being the most talked-about investment idea in the last few months. I decided to get back to the first principles of understanding and knowing manias. The book chronicles 3 manias in the world of investing namely Mississippi mania, the south sea bubble, and Tulipomania. The book scores high on detail but low on storytelling and I would recommend people read up about these manias on Google or Wikipedia.
The Manias often were started with a novel idea, followed up with fancy stories, and then leading to mad frenzy among the crowds. The most common result of all manias is enriching a few and losses for the uninformed gullible crowd. Personally, I believe, more than understanding the nature of mania, the events give us a deep understanding of the markets and investor behavior.
It is a very common saying in India that a bull market is not peaked until the local paanwala does not start offering you investing advice. Well, all I can say is I get a similar feeling about Bitcoin as people with no knowledge are questioning my reasons for missing out on this opportunity. I have a golden rule in investing; I don’t invest in something I don’t understand. This was a lesson learned very early in my career when I invested in pharma stocks.
Recently, Lot of people at 15000 Nifty have started giving me unsolicited tips in stocks. While, I still remember I got worried about the 2008 markets way early in 2006, and stocks moved up much higher before the 2008 crisis. I am not saying we are in a bubble situation, but there is of course a mad frenzy in a lot of areas.
Please don’t convince me to invest in PSU stocks, ever. I would die a pauper rather than invest in PSUs.
Link to my blog of 2006 November – Markets: Dizzying Heights.