“We are all a little weird and life’s a little weird, and when we find someone whose weirdness is compatible with ours, we join up with them and fall in mutual weirdness and call it love.”
These words from the famous American writer, poet, and cartoonist Dr. Seuss rings a bell in my mind every time I hear someone complaining about how the stock market is like a casino that has robbed him of his wealth.
“Stock market is a weird place to be in. I’m better betting on race horses,” said my neighbour as I asked the reason for his sadness during our early morning walk.
“Seemingly he has lost some money as Indian markets have crashed this week,” I thought to myself.
What I thought was right, as he said, “You know what? The Sensex was down 700 points on Thursday and another 200 on Friday! Isn’t this madness?”
I am a good neighbour, so I wanted him to pour out his heart before I could have spoken anything in defense of the market.
And he continued, “I mean, how anyone can make money from stocks when they fall at such a rapid pace?”
I kept silent, as I did not want to offer any unsolicited advice.
But he asked, “You have been in the stock markets for such a long time. You don’t have anything to say on this crash?”
His words seemed as if I was supposed to have a view on every move that the markets made. But then this is the expectation stock market ‘experts’ have themselves created in the minds of people – that they really have a view on each market move.
“I guess people are weird,” I told him.
“People are weird? Huh! I think the stock market is weird!”
“But isn’t the market made up of people like you and me? It has no life of its own.”
“Yeah, I agree. But still it’s a weird place to be in. Horse races and casinos are better places to play the money game I believe.”
I stared at him. “How could you compare a casino with the stock market?”
“Why can’t I? Aren’t both places where people go to gamble with their money?”
“Well it depends on how you see this,” I said. “For gamblers, the stock market is definitely a casino, because like a casino, most gamblers don’t come out rich of the stock market.”
“What do you mean?”
“What I mean is that it all depends on the mindset of the player.”
“Explain that please!”
“You see, if aliens landed on Earth and examined the workings of our stock markets and the behaviour of most experts and investors, they would no doubt question the intelligence of this planet’s inhabitants.
“They’ll think we humans are weird, which we really are.”
He smiled and then recoiled after realizing that I was also talking about him.
“We as investors are often our worst enemies. When stock prices are rising, we become greedy. And it leads us to speculate and to make substantial, high-risk bets based upon highly optimistic predictions.
“In such times, we also focus on return while completely ignoring the risk that we can lose our entire capital, never to get it back.”
He looked at me as if I was scolding him for his weirdness (which I was!).
But he kept silent, as I continued, “And then look at the other end of the emotional spectrum.
“When stock prices are falling rapidly as they are falling these days, people start to believe that the prices will continue to fall. Again, they forget business fundamentals and then blame the stock market as being a casino!
“Isn’t this weird?” I asked.
He didn’t reply. In fact, I realized he was not even looking at me.
But I had to complete my explanation, and so I said, “Regardless of the market environment, many investors seek a formula for success. But the unfortunate reality is that success in investing cannot be captured in a mathematical equation or a computer program. In fact, there’s no fast route to succeed as an investor.”
“So how can one succeed in the stock market?” he finally broke his controlled silence.
“It’s simple. Stop being weird!” I said.
Note: ‘We Are All Weird’ is the title of the latest book from the American author and marketer Seth Godin.