July 28, 2015

China's 1929

The unfolding Chinese stock market collapse is a tragic example of rampant retail investor speculation and financial euphoria. 

This is China’s 1929…pretty soon we will be hearing about unfortunate stories of people jumping out of windows. 

 As armchair quarterbacks, it’s easy to point out the behavioural errors made along the bubble’s climb. However, in the heat of the moment when your idiot neighbor is quickly becoming a millionaire the fear of missing out (aka FOMO) is a big motivational driver. 

 Here’s a before and after look at how quick investors can go from euphoria to despair:

 Before (June 2015: “it's a lot easier making money from stocks than farm work"):

After (July 2015: “I have lost everything”):