TL;DR
Novice investors mistook a short-term market bump following a geopolitical conflict for a reliable investment strategy, highlighting the danger of basing investment choices on fear and speculation rather than fundamental analysis. The incident showcases how easily emotions can lead to financial ruin.
Story
The War-Profiteering Delusion: How Fear Fuels Foolishness
John, a novice investor, saw his portfolio climb after the Iran-Israel conflict escalated. He wasn’t alone; online forums buzzed with similar stories. ‘War is bullish!’ they proclaimed, celebrating the market’s counterintuitive rise.
But this wasn’t a rational market response; it was a confluence of fear, speculation, and sheer luck. Think of it as a house of cards built on sand—a flimsy structure vulnerable to the next crisis.
The Mechanics of Misguided Market Mania:
Many investors, reacting to fear, bought into assets believed to benefit from conflict. This created a short-term pump, not sustainable growth. Some even averaged down, buying more at a loss hoping for a turnaround. ‣ Averaging down: Buying more of a falling asset, hoping to lower the average cost basis. It’s like gambling more on a losing hand—you’re not solving the problem, you’re doubling down on a poor decision. This is what happened to many investors. As many commenters noted, they were losing money.
Human Impact: More Than Just Money:
The emotional toll was significant. ‘I lost $80 and feel bad,’ one user lamented. The illusion of easy profits through war led to reckless investing, and many experienced genuine financial losses. This emotional roller coaster shows the true human cost beyond the market’s fluctuations. The experience can be devastating.
Lessons Learned (The Hard Way):
- Correlation ≠ Causation: Just because two events occur simultaneously doesn’t mean one caused the other. War and market rises can coincide without a direct link. This often resembles the early days of the dot-com bubble or the 2008 financial crisis—panic buying creates momentary gains, concealing deeper instability.
- No ‘Stable Industry’ in Chaos: War isn’t a reliable investment strategy. Profits from conflict are often short-lived and ethically dubious. Recall the Enron scandal—short-term gains often mask long-term devastation.
- Fear is a Terrible Advisor: Market movements based on fear rarely provide sustainable gains. Relying on gut feelings over data, or relying on forums, leads to rash decisions, like averaging down, worsening the situation.
Conclusion: The Illusion of Control
The belief that war is a consistent money-making opportunity is a dangerous delusion. It’s a simplistic view that ignores the complex interplay of geopolitical events, investor psychology, and market mechanics. The stories of those who experienced losses serve as a chilling reminder that the market is always a gamble, especially when fueled by fear and speculation, and that making money from war is morally questionable.
Advice
Don’t chase short-term gains fueled by fear. Diversify, do your research, and only invest what you can afford to lose.
Source
https://www.reddit.com/r/wallstreetbets/comments/1lcvmys/i_guess_war_is_bullish/