Painting the Tape

When you are as old as I am, the phrase been there done that takes on new meaning in all aspects of life.

The stock market and the activity of its participants follow patterns that hold true no matter the decade. It just blows my mind at the similarity of people’s behavior no matter what is the investing trend of the month, year or century.

The underlying principle is always the same: those particular stock market participants want to get rich quickly and with the least amount of effort. They feel if they don’t get in on the flavor of the month the will miss a golden opportunity.

The stock market’s movement up and down is based in large part on the beliefs and sentiments of the people buying and selling. Remember beliefs and sentiments are not quantifiable and measurable. When participants hear of a popular product they tend to believe that if many people are participating then it is a worthwhile venture. This is crazy because your friend or colleague most likely have zero professional qualifications to be making those suggestions. It both amuses and irritates me because I am highly regulated on what I can and cannot discuss, yet people will often believe the unqualified, unprofessional street and the media to their own detriment. This has held true since the Dutch tulip bulb craze back in the 1600s. Many of you readers may not old enough to remember more recent examples such as the dot com boom and bust or closer to home such examples as Bre X and Nortel. Somehow the similarities of these gone by the wayside stories are lost on the latest invention in fintech(financial technology) Bitcoin and its associated versions.

Bitcoin is a virtual currency that came about as a result of the financial crisis of 2008. The invention of Bitcoin was to create a currency that was not associated or sponsored by any central bank or government, and thus outside of regulation.(can you think of a segment of society that would like that?) Bitcoin has not caught on as a mode of payment, its attraction is more in speculating in it or mining which utilizes the technology associated to bitcoin, blockchain. Blockchain does have legitimate value.

Bitcoin has no inherent value, even though it has gone through very wild swings for the cost of one bitcoin. If you compare it to gold for example gold does have intrinsic value. The only value that bitcoin has is the value that market participants assign it. It doesn’t even physically exist, yet people are willing to pay thousands or tens of thousands for a bitcoin.

It always begins the same way. The interested participant(I can’t even say investor) knows someone who claims to have made a lot of money following bitcoin or fill in the blank of the latest fad. Somehow the fact that the interested participant knows the person touting the investment lends credibility. Does that make any logical sense at all?

Almost every wage earner has earmarked all of their net salary for many purposes from paying bills to ensuring a debt free secure financial future. If you are one of the fortunate few that could speculate you should google “painting the tape” before you want to consider any wildly popular so called financial product.

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