IFB74: Potential Investor Problems When Examining the History of the Market

Welcome to Investing for Beginners podcast this episode 74. Tonight we’re going to talk about potential investor problems when examining the history of the market. Andrew has been on a bit of a history bent lately and I’m a big fan of history and I love learning more stuff about what has happened in the past. Because that can always help us in the future when we make decisions those who fail to learn from the past are bound to fail in the future.
So go ahead and starting off Andrew why don’t you go ahead and talk up to us a little bit about short time periods are valueless.
Andrew: yeah so I think this is a nice kind of follow-up to last week’s because we kind of examines the same type of thing right. a lot of studies academic studies about the stock market are looking at what happened in the past and let’s see if we can find a trend a correlation and maybe use that to have better success in the future.
And so we kind of focus in on like the acted the academic part of the particular problems that can arise when you’re looking at particular studies and then how they’re doing that.
Now we can kind of look also how people like you and I the average investor might do kind of similar things and this is particularly common with beginners if you’re not putting thought into this and how it can affect what kind of decisions you’re making then  you might not even realize you’re making these kinds of mistakes.
I mentioned last week I’m reading this book called bull it’s talking about the history of some of the bull markets right now I’m focused on the bull market of the 90s. And it’s cool to like see the book puts yourself in the shoes of some of these people as they were living it in real time.
You had and I’m blanking on the name of this I believe she was a she was an analyst. basically she this was you have to put yourself again in the 90s you had the internet really kind of coming into the mainstream and it was really changing the whole business world and so she really kind of tied herself to technology she was an analyst who really covered technology stocks.
And as adds a lot of these IPOs a lot of investment bankers are making huge sums I think there was one guy it said something where he made like 300 million dollars a year and he was kind of like a leader of one of the companies like a Morgan Stanley or Goldman Sachs or their these investment banks they’re helping these small companies go public obviously getting the Commission’s off of that.
And so a lot of money was being made and a lot of people like this analysts were good at picking out the winners and really kind of bringing the stocks that were going from IPO to into the market and then having like relative success in the business world which would translate to massive success on Wall Street particularly in this time period because there’s just so much money going around.
And you had the Fed cutting interest rates just flooding the market with liquidity so a lot of different factors that were leading up to everything that you saw in the 90s and that finally bubbled up and crashed in 2000-2001.
But this analyst became like a great expert and she became so bullish with technology stocks she produced this like three hundred page report and the book said that a six or eight page report at  on Wall Street was considered very extensive. So she went crazy with this and I think it said something about the future of the Internet or she was essentially covering like the Internet and new tech so she became very bullish. And became somewhat of a darling to the rest of the investment community and the rest of the mainstream.
And so when she was bullish a lot of people trusted her and she was very good at what she did a lot of people trusted her and went bullish on a lot of these stocks and made money for ...