Introduction
In Chapter 7, Wheelan provides an overview of the basic mechanisms of financial markets. The ideas presented by the author can be used to discuss this case study. The chapter is also written in a manner that ensures numerous illustrative examples, which helps to understand the notions, mechanisms, and principles and makes the reading most pleasurable.
Main body
In my opinion, the case study exposition lacks some details, and some room for interpretation exists. Naturally, Wheelan argues against “hot stocks,” but he also admits that there is a chance of profiting from participating in the game. In particular, the author chooses to mention the joke about Wall Streets’ economists and the $100 bill that cannot exist since it has not been picked yet (Wheelan 163, 165). Wheelan does not exclude the possibility of hot stocks profitability, but he warns that most often they are not what they seem (especially to a non-professional). As a result, I would pay attention to details and research.
If my hairdresser or her relatives have degrees in Economics, I think I would pay attention to her opinion. However, the degree does not guarantee too much; for instance, the 2009 crisis showed that bank managers are not always good at economics (Wheelan 158). Therefore, I will look at the history of her tips and the way she explains and justifies them. For instance, I have to admit that the generic word “media” makes me cautious, but there is a possibility that my hairdresser would provide more details and explain the reasons for the change in the market together with her definition of “hot.” If it is concerned with lowering prices, I would be suspicious. As Wheelan shows, dropping the price could be concerned with the need to get rid of these shares (162).
Generally, Wheelan warns against the sure and quick recipes of richness (160). However, Wheelan’s example of an ice cream diet is ridiculous for the obvious reason that ice cream cannot be called a dietary product (148-149). With media stocks, it is difficult to insist that the possibility of them becoming profitable is patently ruled out. If my hairdresser can provide justifications, I would consider the possibility.
After that, I would conduct research of my own and then make the decision. The context would mean a lot, but some general assumptions can be suggested. In particular, I would make sure not to invest all my “eggs” in one media “basket” since diversification of investment is capable of minimizing risks (Wheelan 156, 171-172). Similarly, I would consider the risks, and I have to admit that I am not a risky person. Typically I am unwilling to take more than a moderate risk, which makes the investment less likely.
Conclusion
In fact, there is little chance that I will go for a “hot” stock, but if the hairdresser’s opinion is worthwhile, I will not let it pass just because a $100 bill had not been picked up by anyone else yet. However, I will not base my decision solely on the recommendations of one person, which is also supported by Wheelan’s ideas concerning easy fortune. I will carefully consider the option if it appears feasible and try to make a decision that will fit the circumstances, including the situation in the market, in the world, and in my personal life.
Works Cited
Wheelan, Charles J. Naked Economics. New York, New York: W.W. Norton & Company, 2010. Print.