What is the market up to? I get to listen to the market, or at least a fairly large part of it, as I belong to a finance club with Bay Street's smartest money guys. Collectively they control several billion Canadian dollars, so when they talk, I listen. Over the last five years, since I joined, I have listened to leaders of public companies, owners of private companies, stock promoters, investors and many more. Yet few of these people spoke about the big crash coming up in 2008.
As we leave the decade of the "Naughts" and wrap up lessons learnt about markets in the past ten years, I realize that even this club of such smart men and women followed the markets off the cliff in 2008. What were they thinking?
Back in 2007, Paul Krugman summarized the seven habits that help produce the anything-but-efficient markets that rule the world. I thought a great way to begin the next decade would be a quick review of these:
Seven habits that help produce the anything-but-efficient markets:
1. Think short term.
2. Be greedy.
3. Believe in the greater fool
4. Run with the herd.
5. Overgeneralize
6. Be trendy
7. Play with other people's money
I got these 7 habits courtesy of Paul Krugman, quoted in Fortune back in 2007. Worth contemplating.
Jacoline Loewen, author, writer, and expert in private equity.
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