Death by Euphoria

Here’s How to Avoid It Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] Death by Euphoria - How much for that tulip in the window?… - The three primary drivers of investor euphoria… - The biggest stock market crash in U.S. history may be looming, but with the right financial education, you can thrive… Recommended Link [“What’s happening right now is 100% un-American”]( [Read more here...]( Have you seen this? It’s completely un-American and could be the #1 threat to your money right now. It’s why a former Managing Director at Goldman Sachs says, “It’s a rigged system… and regular Americans need to know what’s really happening.” You can catch her full take by going here now. WARNING: This video comes down Sunday at midnight. Don’t wait... [Click Here Now]( Scottsdale, Arizona July 2, 2021 Editor’s note: Markets keep setting records, and the “everything bubble” continues to expand as investor confidence reaches extreme highs. In other words, watch out. Today, “Rich Dad” Robert Kiyosaki shows you how to protect yourself against overexuberance. [Robert Kiyosaki]Dear Reader, Markets are at euphoric levels. A recent example of overexuberance in stock trading was the GameStop craziness. GameStop’s stock went as high as $380 and became one of the most traded stocks on the market. How did this happen to a mall store with a stone-age business model in the middle of a pandemic? The answer was euphoria. Amateurs rushed in to cash in on a rocket ride. GameStop eventually crashed down to the $40 range, and today it’s in the $200 range. Along the ride, you can bet a lot of people lost a lot of money and made a lot of money. But it’s all betting. AMC is the latest example of this euphoria. It began the year at around $2 before hitting $62 in early June. Today it’s trading around $50. Is that really a fair value? Another, perhaps the ultimate, example of paying way too much is the cryptocurrency market. I’m a fan of crypto. I invest in it. But I only buy it when it’s on sale. Unfortunately, many people wait too long, purchase at the top, and then are afraid to buy when it dips because they think they’ve “lost” money. Throw in other cryptos like Dodgecoin, and you have a lot of amateurs getting their lunch handed to them. Again, this all begs the question: why would people pay way too much on investments? How Much for That Tulip in the Window? To set up how crazy investors can be, allow me to reshare a well-known story: The Tulip Craze. In a nutshell, from 1634 to 1637, the price of certain varieties of tulip bulbs, an especially prized flower, grew exponentially. Things really heated up from 1636 to 1637. Alastair Sooke, writing for the BBC, gives a good account of what was happening: One of the curiosities of the 17th Century tulip market was that people did not trade the flowers themselves but rather the bulbs of scarce and sought-after varieties. The result, as Dash points out, was “what would today be called a futures market”. Tulips even began to be used as a form of money in their own right: in 1633, actual properties were sold for handfuls of bulbs…In 1633, a single bulb of Semper Augustus was already worth an astonishing 5,500 guilders. By the first month of 1637, this had almost doubled, to 10,000 guilders. Dash puts this sum in context: “It was enough to feed, clothe and house a whole Dutch family for half a lifetime, or sufficient to purchase one of the grandest homes on the most fashionable canal in Amsterdam for cash, complete with a coach house and an 80-ft (25-m) garden – and this at a time when homes in that city were as expensive as property anywhere in the world.”…In early February 1637, the market for tulips collapsed…Demand disappeared, and flowers tumbled to a tenth of their former values. The result was the prospect of financial catastrophe for many. Recommended Link [The “dirty little secret” the Fed is afraid to tell you]( [Read more here...]( In this special report, I’ll tell you exactly how Jerome Powell, Joe Biden, and Janet Yellen plan to go behind your back to “fix” the debt. Their secret scheme could cost you nearly everything you own. Or it could make you wealthier than you ever dreamed possible. It all depends on what you decide to do today. [Click Here To Learn Your Next Move]( Modern-Day Tulip Crazes Abound Lest you think a phenomenon like the Tulip Craze was a historical anomaly by backward folks from hundreds of years ago, you need only to look at our own crazes in modern times. Consider the tech stock bubble of the early 2,000s, the sub-prime crisis in 2008, and even the designer fruit craze in modern-day Japan, where it can cost up to £20,000 for a square watermelon. As Mike Taylor, CEO of PIE Funds, writes about these crazes: At each instance, seemingly rational individuals have been affected by the herd mentality, and have bought and sold assets at prices that did not reflect fair value. Often, investors justify their decisions by saying they are in a new paradigm and the current set of circumstances are set to continue forever. The reality is usually far from that - in fact, quite the opposite. Today, we may be facing another craze in stocks. Despite an uncertain economic outlook, lingering high unemployment, and shaky market fundamentals, the stock markets are still setting records. The euphoria doesn’t seem to be stopping. In the Crypto markets, we’re just on the other side of massive gains. Some think it might be a good time to buy. I don’t make predictions, but I also wouldn’t be surprised to see another surge fueled by amateurs, ready to hop back on the speculation train. They are even willing to get behind a crypto like Dogecoin, which started as a joke, and whose growth was mostly fueled by celebrity investment. Three Factors in Market Euphoria Most investors today think that the fun will continue. They firmly believe, as Mr. Taylor writes, that “they are in a new paradigm.” Taylor gives three reasons for this mindset: Anchoring: This is a trait where an investor will "anchor" to a price that is important to them but may have no relevance at all to the market they are investing in. An example of this is focusing on doubling your money but only selling an asset if or when the price reaches this point. Loss aversion: Recognizing a loss is uncomfortable for most people, and investors will try to avoid it whenever possible. That means that if an asset is below the price the investor paid for it, they are prepared to wait in the hope they will get back to break-even. This can prove disastrous if the asset is in terminal decline. At best, it means your capital is stuck in a poorly performing asset when it could be reallocated elsewhere. Herd behavior: From a young age, we learn to succumb to peer pressure as the path of least resistance. When it comes to investing, we take comfort if everyone else is doing the same thing. For example, if everyone is buying overpriced internet shares, even if your rational brain tells you this is madness, you justify your decision because "all my friends are doing it and they are making money, so it must be OK." Recommended Link [Warning: Financial Extinction Event Imminent]( [Read more here...]( On [July 14th, 2021]( a seismic event is expected to send our financial system into a devastating tailspin. At this point, there’s nothing the Federal Reserve, the government or even the President can do to stop it… If you’re not prepared for what’s coming, you should do so now. See how some extremely powerful strategies could mean protecting yourself from the carnage that’s coming… [Click Here To Learn More]( Surely, Buffett, one of the richest men in the world, understands how to avoid these three behaviors. He doesn’t get sucked into the euphoria of the markets. He only profits from them. How? A few years ago, when stocks were again setting records, Buffett mentioned he thought they still might be cheap. He said this because of an environment of low interest rates. "If interest rates were seven or eight percent, these (stock) prices would look exceptionally high," he said. That is the difference between a professional investor and an amateur. Buffett has market fundamental reasons for investing while amateurs are chasing euphoria. You can bet Buffett will exit long before the amateurs do. He’ll make money, lots of it, and others will lose big. Why Financial Education Is a Must-Have to Survive Market Euphoria Unfortunately, the average investor doesn’t understand the fundamentals of the markets, let alone how interest rates impact the value of stocks. They just buy because the market is going up… and everyone else is doing it. And this brings up an interesting question. What’s the antidote to anchoring, loss aversion, and herd behavior? The answer is found in financial education. If you understand how money and markets work, you will be better equipped to identify trends happening and profit from them. Buffett has built his fortune doing just that. And so have I. But you have to go deeper than that. For instance, if you were interested in stocks, you could do a lot worse than investing like Buffett — not like the average investor. Hint: it’s a lot more complicated than buying, holding, and praying. I still believe the biggest stock market crash in U.S. history is looming. I also believe that, with the right financial education, you can thrive while others struggle to survive. All it takes is moving past things like anchoring, loss aversion, and herd behavior to truly understand how money works and how to make it work for you. Regards, Robert Kiyosaki for The Daily Reckoning P.S. If you’re motivated to take control of your future, then [I want to help you.]( The first two steps are easy. One – Join me for my [all-new monthly LIVESTREAM event]( this week. This should be very thought provoking and helpful. During this event, Explosive Wealth Trends, my wife Kim and I will be joined by the Real Estate Guys, Russell Gray and Robert Helms, as well as Cryptocurrency expert, Jeff Wang. We will give you a mid-year review of 2021 and then talk about the investing trends and opportunities we are most excited about. [This event is free for you.]( Two – You should understand the basics and some key information about Bitcoin and Cryptocurrency. So, when you register for my free LIVESTREAM, my team will immediately email you [Rich Dad’s Special Report: What You Need to Know About Cryptocurrency at no cost.]( Both of these resources are free to you and others interested in a better future. I hope you can join me for Explosive Wealth Trends it will be very worthwhile. P.P.S. Another important topic for this event – our team will share why Crypto and Real Estate must be in your plan this year. I expect the strategies we share to help you immediately. [Click here now to get started.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Robert Kiyosaki][Robert Kiyosaki]( author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. 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