Globally Rational

Ever since online stock brokerages like E*TRADE started to show up in the mid-1990’s, the stock market has almost turned into a form of gambling. A few years later in 2000, the market plummeted because tech stocks were overvalued.

Everybody was talking about stocks back then, and rightfully so. The technology sector was booming and anybody could invest easily. Millions of people - including myself - fell into the craze and kept buying more and more shares, which inflated the price even more. Suddenly, these companies were overvalued and they quickly lost everything they had. The investors, many of whom were inexperienced day traders, realized that the stock market isn’t designed as a short-term get-rich scheme and they decided to leave it to the professionals.

Now, eight years later, I think people are starting to forget about their experience. As new industries, like biotech and energy, have been making money lately, more people are tempted to invest again. Armchair investors are again becoming common and I’m concerned that, sometime in the future, we’ll see the same problem as before. The constant buy-sell strategy is threatening the fate of the recent “Great Moderation”, as economists describe the last 20 years of economic fluctuation.

But I’m no economist… I’d really like to see readers’ opinions on this. What do you think?

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