The pandemic turned my parents into day traders
Why do stock markets bubble &amp; collapse?<p>...<p>&gt; One afternoon my mom and I found an envelope in the mail with the Nielsen consumer confidence survey and two dollar bills enclosed. The cash was enough incentive for my mom to start filling it out, ticking a box that indicated the business environment in our Iowa town was as good as it was before the pandemic.<p>&gt; “Really?” I asked. “You think so?”<p>&gt; Her rationale was simple—more optimistic answers would help bolster the market. “I want stocks to go up,” she responded.<p>---<p>NB. markets are <i></i>not<i></i> faith-based. They are evidence-based.<p>The trader believes, eg., IF P(stock-increases | evidence) &gt; risk THEN buy<p>You create bubbles by believing, as all propagandists do, that reality doesn&#x27;t exist. That <i>belief</i> <i>is</i> evidence.<p>That works only until people re-evaluate their evidence. As soon as you look at, eg., actual productivity, the whole thing collapses.