Stock Investment Plan

By Author: Anthony Green
Total Articles: 36
Comment this article

All major bull markets of the last 100 years were fueled by new technology. But, in most instances, the genuine advances

that the technology created were exaggerated into what became an almost religious belief in technology for its own sake.

New Eras and New Economies became fads. Toward the end of bull markets, fads increase and give us a hint of our nearness to

the next bear market. Both fads and new technological advances 34 Bear Market Investing Strategies look much the same on

the surface.

Experience brings the ability to tell the difference between the sizzle and the steak. Thus, in the 17th century, when the

big tulip craze hit, a savvy investor with a modicum of common sense should have suspected that, however full of limitless

possibilities the new globalization that enabled the Dutch to enjoy this exotic flower was, a single tulip bulb could not

possibly be worth the price of an Amsterdam house.

But hundreds of experienced investors bought tulips as symbols of the new shipping technology, rather than buying tulips on

their own merits. They ...
... bought into a fad. So it was in the 1920 Florida land craze. There was nothing wrong with either

Holland's tulips or Florida's land. But one needs to look at them as business propositions, instead of getting caught up in

an abstract idea Investment trusts (we call them Mutual Funds now) were a fad before the 1929 crash.

In the late 1960s, it was electronics companies, many of which by 1970 had lost 80% of their earlier value, and some had

gone out of business entirely. We saw a similar fad in the late 1990s in the form of dot.coms. Both electronics and the

Internet have been magnificent technological advances, and we will enjoy their benefits for years to come.

But they became fads because they represented such spectacular advances that investors ignored such mundane considerations

of whether the companies using the technology were viable businesses. Fads are a major indicator that a bull market is

reaching a bubble stage.