The other day I was driving my daughter to school and a Taylor Swift song came on the radio. She immediately pleaded with me from the back seat to turn it up. As she was bopping her head back and forth and singing the tune – the lyrics got me to thinking about how investors approach the financial markets much in the same way Taylor Swift approaches her relationships.
At one point the tabloid covers show her happy, smiling, holding hands and laughing. Not too long after we see her heartbroken and her next hit song, which makes her a few million more dollars, rings of the love lost. Then, her love comes back into her life promising that this time will be different. Only it isn’t. On again, off again and back on again.
The interesting thing is that it is not so very different with our continued love/hate relationship with the financial markets. Investors fall deeply in love with the markets as they are rising. Rising asset prices create a euphoric feeling that begins to cloud our judgment. We overlook the flaws, and the early warning signs, with willful blindness. After all…”ain’t love grand?”
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