Of Sparrows and Bull Markets: A Lesson from History

1. But the point here is that the Chinese – after getting the ‘brilliant’ idea to eradicate pests to eradicate diseases – ignored the “second-order effects” of their actions.
2. We buy sub-standard businesses because someone else, especially some big investor, may have made money betting on it and then shouting about it, and fail to ask, “And then what?” For instance, when we are buying leveraged businesses, we fail to consider that most such businesses don’t have the staying power in the face of adversity.
3. But the reason I shared the above image was to serve as a warning that most people in the stock market – and especially new entrants, and especially those with low incomes and savings – do not understand the dire consequences of losing money gambling in stocks when the tide turns for the bad, and it does turn bad after a heady period, like what we have witnessed over the past 18 months.