Comments on: Poor Pu’er http://calpolymbatrip.com/2009/china/poor-puer/ The MBA Graduate Program at Cal Poly Tue, 22 May 2012 00:52:33 +0000 http://wordpress.org/?v=2.6.3 By: Patrick Johansing http://calpolymbatrip.com/2009/china/poor-puer/#comment-10115 Patrick Johansing Thu, 19 Mar 2009 22:31:45 +0000 http://calpolymbatrip.com/?p=1516#comment-10115 That article made it sound like people were just stockpiling disks upon disks of tea in their basements. When so many people are buying something just to stockpile it, isn't that a clue that demand is artificially high? And the rising prices seemed to indicate only that more people were investing in, rather than drinking, tea. Here's good reason to take a hard look at whatever appears to be hot. That article made it sound like people were just stockpiling disks upon disks of tea in their basements. When so many people are buying something just to stockpile it, isn’t that a clue that demand is artificially high? And the rising prices seemed to indicate only that more people were investing in, rather than drinking, tea. Here’s good reason to take a hard look at whatever appears to be hot.

]]> By: Andrea Muntzel http://calpolymbatrip.com/2009/china/poor-puer/#comment-9655 Andrea Muntzel Sun, 08 Mar 2009 01:27:54 +0000 http://calpolymbatrip.com/?p=1516#comment-9655 Great find, Morgan. I think taking investment jargon out of our own bubble situation and relating it to something we all can understand (like tea!) makes it easier to see where the problems lie. I think everybody’s an idiot in a bubble situation. The buyers start it; or in the case of Wall Street, Ivy League stock market analysts make a recommendation and buyers follow it. The demand goes up and the price is soon to follow. Then, once everyone’s making money, the supply goes up so that everyone can make more money. Then the price goes down and then the demand goes down and then the supply goes up more so the price goes down more and then everybody loses all the money they had in the beginning except the people who got out early. Okay, maybe I’m oversimplifying… regardless, we could go around in circles for days trying to pinpoint who’s at fault in this situation but to me, the only people who can really prevent bubbles are the average buyers that think they can beat the system and get something for nothing. My very first day in my very first Finance class, my teacher said this: “The first rule of business is that there’s no such thing as a good deal.” Now, that’s all I remember from that Finance class but it’s really the best financial lesson I’ve ever received. When people get together and think they can beat the market, they lose. I will admit, I’m relatively ignorant about the whole bubble situation and all I can really speak from is personal experience. But this is my experience with the situation and this is why I place my blame where I do. Several years ago, when we all believed housing prices would never stop going up, I remember my parents talking about variable interest rates and what havoc they would eventually cause. I remember a few years ago, when my older sister’s friends began buying house after house and my sister was bewildered by the fact that she had a higher income but couldn’t even begin thinking about buying a house. So what was happening? People were obviously buying things they couldn’t afford. Whether the banks gave them a loan or whether the investment banks were buying up the mortgages, it doesn’t change the fact that everyone was buying something because they thought they could get a “good deal.” My parents have always touted the fact that real estate is the best investment but not because its value always goes up. It’s the best investment because even if it isn’t gaining value right now, you still get to live in it! It has intrinsic value beyond what you can get for it if you sell it; it has tangible value. I think the tea situation makes things clear. Buyers bought ridiculous amounts of tea because they were counting on the resale value to go up; but tea is only worth what tea is worth. If you’re making ridiculous amounts of money on something, it should cue you to the fact that eventually things are going to catch up with you; the reason is because there’s no such thing as a good deal. Alex, I love your historical perspective; truth to the old adage that history repeats itself, hmm? Great find, Morgan. I think taking investment jargon out of our own bubble situation and relating it to something we all can understand (like tea!) makes it easier to see where the problems lie. I think everybody’s an idiot in a bubble situation. The buyers start it; or in the case of Wall Street, Ivy League stock market analysts make a recommendation and buyers follow it. The demand goes up and the price is soon to follow. Then, once everyone’s making money, the supply goes up so that everyone can make more money. Then the price goes down and then the demand goes down and then the supply goes up more so the price goes down more and then everybody loses all the money they had in the beginning except the people who got out early. Okay, maybe I’m oversimplifying… regardless, we could go around in circles for days trying to pinpoint who’s at fault in this situation but to me, the only people who can really prevent bubbles are the average buyers that think they can beat the system and get something for nothing. My very first day in my very first Finance class, my teacher said this: “The first rule of business is that there’s no such thing as a good deal.” Now, that’s all I remember from that Finance class but it’s really the best financial lesson I’ve ever received. When people get together and think they can beat the market, they lose.

I will admit, I’m relatively ignorant about the whole bubble situation and all I can really speak from is personal experience. But this is my experience with the situation and this is why I place my blame where I do. Several years ago, when we all believed housing prices would never stop going up, I remember my parents talking about variable interest rates and what havoc they would eventually cause. I remember a few years ago, when my older sister’s friends began buying house after house and my sister was bewildered by the fact that she had a higher income but couldn’t even begin thinking about buying a house. So what was happening? People were obviously buying things they couldn’t afford. Whether the banks gave them a loan or whether the investment banks were buying up the mortgages, it doesn’t change the fact that everyone was buying something because they thought they could get a “good deal.” My parents have always touted the fact that real estate is the best investment but not because its value always goes up. It’s the best investment because even if it isn’t gaining value right now, you still get to live in it! It has intrinsic value beyond what you can get for it if you sell it; it has tangible value.

I think the tea situation makes things clear. Buyers bought ridiculous amounts of tea because they were counting on the resale value to go up; but tea is only worth what tea is worth. If you’re making ridiculous amounts of money on something, it should cue you to the fact that eventually things are going to catch up with you; the reason is because there’s no such thing as a good deal.

Alex, I love your historical perspective; truth to the old adage that history repeats itself, hmm?

]]> By: Chris Carr http://calpolymbatrip.com/2009/china/poor-puer/#comment-9443 Chris Carr Thu, 26 Feb 2009 17:54:15 +0000 http://calpolymbatrip.com/?p=1516#comment-9443 My take away from this article .... Crooks, speculators, and not so bright people who don't understand demand, supply, markets, etc. and/or act according to the fantasy market they have created in their head rather than market that actually exists before them, are plentiful in the world. Not just a Wall Street thing or sickness. My take away from this article ….

Crooks, speculators, and not so bright people who don’t understand demand, supply, markets, etc. and/or act according to the fantasy market they have created in their head rather than market that actually exists before them, are plentiful in the world. Not just a Wall Street thing or sickness.

]]> By: Alex vanDalen http://calpolymbatrip.com/2009/china/poor-puer/#comment-9415 Alex vanDalen Tue, 24 Feb 2009 02:51:15 +0000 http://calpolymbatrip.com/?p=1516#comment-9415 Interesting article Morgan. It seems that bubbles are everywhere. However, they are hardly a new phenomena. The Dutch, the inventors of the stock market, suffered a very simliar situation in the 1630's, only in this case it was crazy speculation about tulips. The English (the claimed inventors of the stock market) suffered two less than a century later in the Missisipi and South Seas bubbles...this was another bubble on bubble situation as they both occured within a year of each other... this time from the sale of stock derived from speculation on land, trading rights, and rescources that the British really had no control over. All sounds a bit famliar eh?... I like the fact that Bubbles are still a source of mystery in an otherwise predictable numbers game. It is a reminder that the forces of which evolved and shaped capitalism from the feudal order are still very much in place and at work on it. Here's another issue... the bubbles are getting higher in frequency and intensity. Is this simply a reflection of the overall increase in the speed at which captial flows around the globe? In our current predicament, I dont know who the schemers and who the dupes are either ... but i dont really think it matters. The faces change but the roles remain the same. In the end everyone who participated is at fault to some extent. Bubbles are as one Scottish (the claimed inventors of Economics) author desciribed them in 1841, the "Extrodinary Popular Delusions and Madness of Crowds" . The madness of crowds is to some extent the essence of democracy. What are we to do? All that seems clear is that the Bubbles have a had a profound effect on our world... and they aint done with us yet. Interesting article Morgan. It seems that bubbles are everywhere. However, they are hardly a new phenomena. The Dutch, the inventors of the stock market, suffered a very simliar situation in the 1630’s, only in this case it was crazy speculation about tulips. The English (the claimed inventors of the stock market) suffered two less than a century later in the Missisipi and South Seas bubbles…this was another bubble on bubble situation as they both occured within a year of each other… this time from the sale of stock derived from speculation on land, trading rights, and rescources that the British really had no control over.
All sounds a bit famliar eh?…
I like the fact that Bubbles are still a source of mystery in an otherwise predictable numbers game. It is a reminder that the forces of which evolved and shaped capitalism from the feudal order are still very much in place and at work on it.
Here’s another issue… the bubbles are getting higher in frequency and intensity. Is this simply a reflection of the overall increase in the speed at which captial flows around the globe?
In our current predicament, I dont know who the schemers and who the dupes are either … but i dont really think it matters. The faces change but the roles remain the same. In the end everyone who participated is at fault to some extent. Bubbles are as one Scottish (the claimed inventors of Economics) author desciribed them in 1841, the “Extrodinary Popular Delusions and Madness of Crowds” .
The madness of crowds is to some extent the essence of democracy. What are we to do? All that seems clear is that the Bubbles have a had a profound effect on our world… and they aint done with us yet.

]]>