He says he recently made a killing in Intel. Another fast food worker boasted about his recent profits in the stock market. A few years ago, neither of these speculators knew anything about investing in stocks, nor did they know anything about the companies whose stocks they have been trading. These are sure signs we are nearing the end of a remarkable bull run. Whether in politics or economics, the crowd has made its greatest mistakes at the point in history when events are about to change drastically.
People tend to follow the crowd.
The crowd never reasons, but follows its emotions and accepts without proof what is suggested or asserted. While it may be difficult to predict the actions of an individual, it is simply a matter of mathematical probability to predict the actions of the crowd. My research shows a large segment of today's stock market speculators are short term. The volume in the stock market over the past few years indicates that stocks are changing hands at a rapid pace and apparently back and forth. Stock options contribute to the new short term way of thinking and appear to have transformed the way smaller investors approach the stock market.