A stock-market parable

Here is a little parable about the worldwide stock market.
The world is filled up with idiots like you and me, who think we understand the stock market.
As idiots when we see a price of something going up, we think it will keep on going up, because we are idiots.
When the price is falling down, as idiots, we think it will keep on falling down.
But it is not out fault, because as idiots, we try to look for others who we feel are more knowledgeable, because they can help us avoid making stupid decisions. Thus, we watch the television.

The television companies would have to pay good money for their experts to discuss more about the stock market. Since they are paid good money, they have to be smart, and thus, their opinions are valuable.

Apparently, they are just as big of idiots as we are.

It is just like watching The Weather Channel. You can only trust them as far as telling you what is happening now and what happened in the past.

When idiots listen to idiots, we remain idiots.

Now, on to the story.

Allen is riding the ship for the first time. But Allen knows what a leak on the boat means. He also knows that when you see water on the floor, there is a leak on the boat.

The leak on the boat could be a simple plumbing problem, or a major leak that can cause the boat to sink.

Once, Allen saw a leak on the boat, but noticed that the leak was caused by a leaky faucet. There was no problem.

Except there was a village idiot who ended up screaming “The ship is sinking! Get out as fast as you can!”. Now, as you can see, many people are starting to run all over the place, but Allen knows it was only a faucet leak, there should be no problem.

On the other hand, because of the massive panic, Allen is starting to believe that the ship might indeed be sinking. He is now torn.

“Could the ship be sinking, or is this just a magnified market sentiment because of some stupid leaky faucet?”

People are running all over the place, while Allen stands there, confused.

Now, the captain comes out “Do not worry, the ship is not sinking”, as another person now replies “BS!,” and the panic ensues.

So, the captain goes, “Look, we have more than enough life vests to go around, in fact, here, hold on to one. If the ship does sink, do not worry, you are safe with this one.”

To which another person replies, “So the ship really is sinking!” The entire ship is in confused panic.

Allen decided to just take the vest and watch in the corner, confused, like everyone in the same corner.

Now, Allen starts talking to them. “Is the ship really sinking?”

To which everyone now starts talking about sinking ships, and how there could have been rocks below that scratched on the ship hull.

Now, Allen really thinks the ship is sinking. In all wariness, all he can think of is if the captain jumps, he will join. If the captain is too heroic, he will need someone less loyal to the ship to be his gauge.
But who would know this situation best?

Ah, the confusion Allen is in. Is the confusion every other person is in. Ships are always found to be on some rocky waves, and ships can never remain dry. But it takes only one idiot to scare the crap out of everyone else.

  

– Column by Haresh Daswani