tag:blogger.com,1999:blog-7366878066073177705.post2542106681111066697..comments2024-02-09T18:16:45.614+00:00Comments on The Psy-Fi Blog: Weird Marketstimarrhttp://www.blogger.com/profile/06254802085744425067noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-7366878066073177705.post-12534907763337992682010-12-06T14:02:22.612+00:002010-12-06T14:02:22.612+00:00"Dangers of buy-and-hold"?
When I look ..."Dangers of buy-and-hold"?<br /><br />When I look at a chart, the only thing that I can say with certainty is that, over time, markets go up.<br /><br />The whole of our WIERD system conspires to make this so.<br /><br />The only danger of buy-and-hold is assuming that you choose the date to realise profits.<br /><br />Have faith in the long trend and retire when your investments hit the expected value. This might mean you have to wait 5 years longer than suits.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-27893437478559661492010-12-05T10:04:38.970+00:002010-12-05T10:04:38.970+00:00Good piece. Among other things, reminds me of Doug...Good piece. Among other things, reminds me of <a href="http://www.edge.org/3rd_culture/rushkoff09/rushkoff09_index.html" rel="nofollow">Douglas Rushkoff</a> pointing out that the market is engineered, not an ineluctable fact of nature. It is "a social construction enforced with gunpowder."mchlnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-30626154782086988392010-12-04T16:56:15.282+00:002010-12-04T16:56:15.282+00:00I think it's great when people explore the mos...I think it's great when people explore the most fundamental questions. These are the ones we are always messing up!<br /><br />The stock market is an extremely unusual type of market. Much of our problem with it derives from the fact that we pretend to ourselves that it works in the same way as other markets.<br /><br />In all other markets that I can think of, the price of a good is derived from the working out of conflicting positions taken by sellers and buyers. Sellers always want high prices. Buyers always want low prices. They work out their differences and meet somewhere in the middle.<br /><br />In the stock market, the buyers love high prices! How many people do you know who put money into their 401(k) accounts regularly complain about the rising price of stocks in the way that they complain about the rising price of bread and the rising price of movie tickets? The problem is that most of the people buying stocks already own some -- they adopt the bias of the stock owner (a seller) even though in reality they are more buyers than owners. The people planning to buy lots of stocks over coming years are often found rooting for price increases!<br /><br />The job of any market is to set prices properly. So the stock market does eventually perform this essential function. But it can only do so by crashing and bringing about an economic crisis because of the lack of any price discipline in this funny sort of market where buyers of the product being marketed favor high prices being set for it.<br /><br />For the stock market (and our free-market economy) to survive, we need to create tools that effectively make the point that net buyers of stocks should favor low prices. Only by educating people to the dangers of Buy-and-Hold (which posits that ignoring price can work) can we make the stock market function in the manner of all other markets.<br /><br />RobRob Bennetthttp://arichlife.passionsaving.comnoreply@blogger.com