The financial markets have gone crazy, is the view that many people share today. Excesses of all kinds have made their way to the fore. Bubbles and manias are in the pink-paper headlines often.
The base is always strong. It’s what piles up, that can be…way off. Say a company worth $100, has a 100 shares each worth 1$, and 99 of these do not trade. But that 1 remaining share that does trade, has now found a new buyer. That buyer is willing to pay 50$, for just that one share. You know the new value of the company now? Even though only that 1 new share was traded at $50, all the 100 shares are now implied to be worth $50 as well. This makes the value of the entire company = $50 x 100 shares = $5,000! All because of one trade. The same is true on the downside too. If just the one share was exchanged at $0.5, the company would be valued at $0.5 x 100 shares = $50. This is how extremes get created in the market. A few crazy trades, and suddenly the tide of sentiment has seen a tectonic shift.
It’s not too different with human beings. We too have a solid base. But we let the most recent events – like someone shouting at us, or not believing us, or our inability to clear an exam or such – to define our whole lives. These stray incidents should be seen exactly as that – one-offs. But we extrapolate this to our entire existence, and go into insane levels of depression and anxiety. The opposite is true as well, as we may extrapolate some recent success and take it to the moon, with no ego in check.
We are a sum total of all our life experiences, not just the ones we came across today or yesterday. This is good to keep in mind, so that our moods are always cheerful, and balanced.