Bubbles, Baseball and Banana-Republic Inflation

There are a few stories that might be of interest.

27-southseabubble

The first one is from Financial Bubbles, capsule one in the Historical Returns series, courtesy of the Baker Library at Harvard Business School.

The South Sea Bubble was not an isolated bubble event in 1720. As the South Sea Bubble was developing, a general interest in joint-stock investment opportunities was also picking up pace. By the middle of 1720, sometimes known as the “Bubble Year,” the market was flooded with a remarkable range of new ventures, each creating smaller bubbles as the speculative frenzy mounted. If it could be imagined and promoted, it was likely available for trade.

The second one can be filed under Managing Inflationary Expectations.

Gas stations set ablaze as Iran begins rationing
Iran is rich with crude oil and is the second largest exporter in OPEC. But it has far fewer refineries than it needs to satisfy booming domestic demand, so it must import as much as half its gasoline from refineries abroad, at a cost of $5 billion a year.

Analysts warned that rationing would make it difficult for unemployed people who used their private cars as taxis to earn a living and that it could accelerate inflation, which is already a problem.

Prices of dairy products like milk, butter and yogurt have risen by 20 percent or more this week. — IHT.com

Last, but not least, Richard wrote a really good article about why it is important to keep swinging, and why this necessitates taking care of all the niggly logistics of trading up front.

Most traders focus on cutting off strings of losses. But, if you apply proper risk management techniques, then strings of losses won’t take you out of the game. A much bigger problem, which many traders overlook, is that missing out on winners can hurt you far worse than losses. Your overall positive expectancy is based on your winners outpacing your losers, but for this to work out, you actually need to have the winners. And, you can’t have winners if you aren’t trading. — Richard, MoveTheMarkets.com

By extension, when we hit one into the stands we don’t just run to first base. We must make the home run, that is, juice a winning trade rather than take a small profit.