And I might add maybe not the happiest people either. They could have everything they want yet they don’t always seem all that happy. Elon Musk for example doesn’t seem much happier than the average person, maybe even less so (depends on who you’re comparing against of course).
there’s a book called Reminiscences of a Stock Operator, written over 100 years, that lays it out pretty cleanly.
but the biggest point is this, the US’s financial markets are specifically left unregulated compared to others to “facilitate liquidity”. in practice, the various actors meant to “facilitate liquidity” are more often than not just extracting liquidity for themselves, as US financial rules essentially give control of the PA (price action) to whoever has the most $ in play.
US style option exercise rules vs. European style being the biggest kicker
the next is just this, that even given derivative has actual value (in theory, future projected dividend returns) and it’s current value (whatever it’s trading at now). the more these 2 values diverge the more someone who trades understanding actual-value can take advantage of people only trading on current-value. note, anyone who “invests” automatically/passively is trading on the latter, and the majority of people trading actively trade on the latter deliberately (they know the game is rigged and pull their profits out deliberately and often). for example, the overwhelming majority of stocks don’t, and never will pay, pay a dividend. therefore…rheir actual value is worthless, so why is anyone trading them?
A bubble is when these “liquidity facilitaters” deliberately run the price of everything up well beyond their actual value, then those that know the rules and actual value hunt this liquidity down and don’t put it back it (or atleast, don’t put it back in mindlessly), the MM’s then dump the prices in an attempt to trigger a selloff by emotional traders (people seeing their retirements evaporate etc.) so those that know can buyback in at massive discounts.
I don’t mean this in some conspiratory way either, this is just a natural consequence of how the rules have been designed over the centuries. if you can get anyone experienced in the financial industry to talk to you honestly (a rare thing, admittedly) about the industry they will confirm this. how our financial markets are setup is arguably the main reason the rest of the world deals with our shit, not our bloated military but how much exit liquidity we provide other countries rich-people. because the american population as a whole as way more $ than sense, we have an incredibly rich and incredibly stupid population that buys into this casino constantly because our politicians were
bribedlobbied to tie our pension systems into the casino and people just…accepted it, for some reasonI’m glad that worked for you. Everything changed in 2008. I would say the old cycles of the market and PE valuation rationality is gone in favour of meme stock style gambling. I think that anything written prior to 2008 on the subject is less useful and the yearly value taking cycle is only still maintained by the old school investors. Some who want some sort of comfort in their approach and want to believe they can make it work. Those people are just handing money to each other now while the billionaires just gamble large sums for bragging rights.
oh for sure, as far as P/E and “expected future dividend returns” and shit it’s all cooked for the overwhelming majority of bluechip shit. that’s not where the $ is made
that book really is eye-opening, wallstreet never changes, they just occasionally rebrand.
PFOF is just bucketshops all over again, for an example. the game is rigged, knowing/accepting that is the first lesson you have to get into your head before you start making serious returns…it’s…so easy honestly, actually really messed with my head. made me realize just how much time i wasted working the last 5-7 years of my life, made more in the last 3 months than the prior decade pretty much (and all with very little risk, i’m still not confident enough to short anything)