As I continue to stress as the stock market continues to seem to defy economic reality; while much indeed changes over time, there’s much about human nature that indeed doesn’t seem to.
Investor Amnesia’s James Catherwood quotes Warren Buffett on the 2008 market meltdown:
“In a 2008 appearance on Charlie Rose, the host asked Warren Buffett: “Should wise people have known better” during the financial crisis? Buffett responded:
“People always should know better. People don’t get — they don’t get smarter about things that get as basic as greed. You can’t stand to see your neighbor getting rich. You know you’re smarter than he is and he’s doing these things and he’s getting rich. And your spouse is getting unhappy with you because you aren’t doing. Pretty soon, you start doing it.
So you get what I call the natural progression, the three I’s, the innovators, the imitators and the idiots. Everybody just kind of goes along and you look kind of silly if you disagree. You can have these crazy Internet valuations in the late 1990’s, but they proved themselves out in the market. I mean, the next day, they were selling for more than they were the day before. And people said, you’re crazy if you don’t get in on this. It’s very human.””
He then goes on to quote from The Economist magazine in 1866:
“We have heard an anecdote told by a good City broker. He said, “There were three stages to a speculation: First the clever man—the original man—finds a good thing out; then the whole trade sees he is right and joins; and last comes the gentleman from the West-end and upon which we know it is all over.”
Clearly, the unfortunate horde who bought everything dotcom in the late-90s hailed from the “West-end”, and I sadly suspect that we’ll ultimately find that those today eager to bid up bankrupt auto-renters, airline stocks the minute, ironically, the billionaire quoted above dumped them, and an electric car maker to a market cap exceeding Toyota’s, not to mention the US’s “Big-3” combined, happen to have grown up in the very same neighborhood…