Why do people lose money in the stock market?

The reason why people lose money in the stock market is that we are genetically programmed to survive in the real jungle. The instincts which preserves our lives in the real jungle are disastrous in the financial jungle.

For example, we instinctly find security in numbers. In primitive times we organised ourselves in small groups that work together for survival. But in the financial jungle this is disastrous. When everybody is buying stocks we should be selling. But that is very hard to do because it goes against our instincts. When everybody is selling, we should be buying. But that too is hard to do. We feel safety in a large group - precisely the same instinct when we were in the real jungle.

We also are programmed to avoid pain and seek pleasure. Pain and pleasure are things that we learn when we are very young. Thus we are quick to take profits and slow to cut losses. It is a great joy when we take profit and we feel pain when we take our losses. When we take profits, we think of the things that we can buy with the money - that car, expensive holidays or a g reat meal. When we cut our losses, we know we know that we have abandoned hope in using the money to buy those things that will bring us pleasure.

This is wrong from an investment point of view. The correct approach is to let our winners run and dispose of our mistakes before they do more damage.

Thus human nature makes us lose money in the stock market.

Queen Isabella and the Inquisition

After reading a fascinating book about Queen Isabella of Castille,
I decided to put my thoughts on paper. The Queen and her husband sent Christopher Columbus to discover America and reunited Spain by conquering Granada. The book, 'Isabella, the last Crusader,' gave a sympathetic look at the Queen.
It painted a picture of a queen as a decent person who forbade enslaving the Indians from the New World. But she also was responsible for the excesses of the Inquisition.
How do we explain the contrasting behavior? Firstly, let me sketch what life was like in 15th century Spain. During this period, Spain had three large communities - Christians, Jews and Muslims.
Many of the Jews had converted to Christianity and are known as Conversos. The Jews and the Conversos were generally prosperous which excited the jealousies of the Christians and Muslims. While some Conversos were sincere in their new Christian Faith, others converted out of expediency.
Conversions allowed access to more occupations, political power and greater wealth. Many Conversos were working for the monarchs and in the Church hierarchy. But suspicions lingered because many Conversos were seen to be attending Synagogues on Saturdays and Mass on Sundays. Some even openly mocked their new faith.
Also the loyalty of the Jews were in doubt in Christian Spain. They were blamed for helping the Moors to overthrow the Visigothic Kings in the 7th century. Later, the reverse happened and the Jews helped King Fernando III (aka Saint Fernando) to reconguer Andalusia. He rewarded them by converting many mosques into Synagogues.
During Isabella's time, Christian Spain still faced a threat from Muslim Granada and North Africa. So long as Granada remained in Muslim hands, the threat of a new invasion from North Africa remained. The Turks then was a superpower and they attacked Italy and sacked its cities.
Given Spain's front line position, fear was acute. Fear produces paranoia and paranoia produces extreme actions.
This explains the severity of the Inquisition in Spain. Inquisitions in other parts of Europe were mild. Very few people were burnt. Only in Spain did the numbers reach such a high figure. The target of this Inquisition were mostly Conversos whose faith was doubted.
Many of these fled to Rome and appealed to the Pope. The Pope censured the two monarchs - Ferdinand and Isabella twice. A modern example of the paranoia that gripped Spain can be found in the McCarthy era witch hunts in the 1950s.
People were suspected of being Communists and of being spies for the Soviet Union. Some were executed for being spies. Others were jailed and many lost their jobs.
The same thing happened in World War II when thousands of Japanese Americans were interned for the duration of the war because their loyalty was doubted.
Thus the 15th century equivalent of the Joseph McCarthy witch hunts was the Inquisition. Those suspected of being false Christians or heretics were seen as potential traitors who might sell out their country to the enemy, the Moors. Similarly, in the 1950s Communists were seen as potential traitors because of the Cold War against Communism.
This also accounts for the expulsion of the Jews and Moors later on. It is tempting for us to think that we moderns are more tolerant, more civilized than people 500 years ago. But I don't think human nature has changed or can change in the future. Given the same circumstances, we will still act the same way.
I have no doubt that if the war against radical Islam gets worse with more terrorist outrages, something like this will again happen.