Most of us assume, without giving it any thought, that an upward trending curve in a chart is good. This is especially true for simple economic indicators we are told are signs of prosperity. But the positive image of the upward trending curve is often unfounded and based on mantras rather than common sense.
The fact is that most charts with a steep upward curve represent escalating imbalance and an upcoming adversity for most of us. They are not sustainable and invariably end in a crash that mostly affects those who have no control over the curve. Common sense should therefore tell us that if upward curves are too steep they should be countered with any means possible.
The solution to this dilemma may be simple. The fact is that whether the graph represents escalation in prices, consumption or air temperatures, it is usually driven by the same engine; dumb money. The task before us is therefore to do our best to minimise the influence of the forces that are driven purely by money and add no value to the economy. These forces only know how to inflate the economy until a bubble bursts.
We need to take responsibility for our own investments and stop relying on others to tell us how much an investment is worth and why. A decision to invest should not be based on how much a share price can be inflated over the shortest possible time. It should be based on our own experience, our intuition and our belief in the long-term sustainability of the business. We should also keep in mind that we can't expect high returns without the risk that naturally comes with real value creation.
We should spend less time admiring unsustainable upward trending curves. We should also stop confusing the supply and demand for money (speculation driven) with the supply and demand for products and services (value driven) and let the latter drive economies.
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