The basics

Lets start with the basics. I made some rules which made me understand markets better.

1. Every market boom will be followed by a bust. It is not possible that markets reach equilibrium on the booming phase, it will far overreach equilibrium on positive side and bust terribly to get away from the equilibrium on the negative side. The bust will be followed by another boom.

2. Everybody in general is an asshole.
This is an important rule and how to differentiate between an intelligent person and an asshole.
People who earn significant money, doing anything, any shit thing, start to think that they are intelligent and not assholes.
In any boom, when people are earning money, you will find every asshole turning into an intelligent person. And when the bust occurs, every intelligent person will look like an asshole.
So whenever a boom ends with a bust, and you hear what were so many intelligent people doing, how can they not anticipate this terrible bust, you already have the answer. All those intelligent people were actually asshole, and since they were making a lot of money at the time of the boom, you thought they were intelligent. At the time of boom, you will say that CEO is an intelligent guy and when the boom busts, you will say, that asshole CEO.
So, money changes the way you look at people and it is about how much money you make.

3. Majority will always loose in the market. Never follow people advice, never invest from ideas of magazines and newspapers which have a huge reader base.

Explanation : Somebody asked me, should i store soybeans in my warehouse, will i get a better price some months down the line ? I told him yes, he stored some soybeans, and made good money on his investment.
But now, i told the same thing on television, so everybody stored soybean, so there was a shortage right now and prices jumped, but some month down the line there was oversupply and prices crashed terribly.
So, just because this investment idea was floated on a television, it turned out to be a terrible investment. Always go short on television, newspaper investment idea after 3-4 months. Those ideas create a short boom but mostly ends with terrible bursts after some time.
I made decent money by reading 4 month old news papers. I never understood why people need news to make money. I am the last one to get news, some times i get them after 4 months.

I used to watch serial on DD1 in 90's called Kisan, they suggested what should farmers grow to fetch good money on their crop and along with other crop care fundaes. But whatever they suggested, became bumper crops in the next sowing season, leading to heavy losses to the majority of the farmers.
Majority will always loose, in a market place when price is decided on the basis of supply and demand. If prices are going down, remember that majority have bought or are long on that asset. If price are going up, majority does not have or are short on that asset.

4. Rules on identifying these bigger cyclical booms and busts which last for 3-5 years and change the macroeconomics around them will be part of my next posting.