It was autumn, and the Red Indians on the remote reservation asked their new chief if the winter was going to be cold or mild. Since he was a Red Indian chief in a modern society, he couldn’t tell what the weather was going to be. Nevertheless, to be on the safe side, he told his tribe that the winter was indeed going to be cold and that the members of the village should collect wood to be prepared.

But, being a practical leader, after several days he got an idea. He went to the phone booth, called the National Weather Service and asked, “Is the coming winter going to be cold?”

“It looks like this winter is going to be quite cold indeed,” the meteorologist at the weather service responded.

So the chief went back to his people and told them to collect even more wood.

A week later, he called the National Weather Service again.

“Is it going to be a very cold winter?”

“Yes,” the man at the National Weather Service again replied, “It’s definitely going to be a very cold winter.”

The chief again went back to his people and ordered them to collect every scrap of wood they could find.

Two weeks later, he called the National Weather Service again.

“Are you absolutely sure that the winter is going to be very cold?”

“Absolutely,” the man replied.

“It’s going to be one of the coldest winters ever.”

“How can you be so sure?” the chief asked.

The weatherman replied, “The Red Indians are collecting wood like crazy.”

Continued-

When I continually hear and read about “excess liquidity”, “sustainable record corporate profits”, “new highs”, “Goldilocks economy”, and that “central bankers today are smarter than in the past”, I wonder whether the 19th-century economist John Ramsay McCulloch wasn’t on to something when he wrote:
“In speculation, as in most other things, one individual derives confidence from another. Such a one purchases or sells, not because he has had any really accurate information as to the state of demand and supply, but because someone else has done so before him” (J. R. McCulloch, Principles of Political Economy, 2nd ed., London, 1830).

What McCulloch omitted to add is that speculators not only buy assets because someone else has done so in the past, but because they expect that in the future someone else will enter the market and purchase the asset from them at an even higher price, since “excessive liquidity” will surely push asset prices higher.

The bigger fool theory.
The chain letter principle.
Just watch what others are doing, jump on the train in the beginning not at the end.