"My neighbor owns five houses and flipped three last year, why can't I do the same? Home prices never go down so what do I have to worry about."

The Cheerleader Effect or talking heads on TV as the second coming of Jesus

Investors are constantly bombarded with information in support of the bull from talking heads on Television, either from professional investors, or from sell side analysts, the great facilitators of the bull market whose job it is to hold our hands while we continue our journey through commodity investing. All of these people have vested financial interests in the bull, and although this is disclosed, usually at the conclusion of the appearance, I don't think that it is generally understood.

This positive reinforcement has a huge unconscious effect on investors. I think that being on television somehow leads to this aura of omniscience that filters down to investors who watch them. Is it that hard to get on television? I don't know - they do need a constant flow of material to entertain us with.

What I do know is that sometimes it is hard to take what they say seriously when two weeks earlier, I saw the same guy during a conference, trying to fondle an 18 year old stripper who was bouncing around on his lap during the evening entertainment hour. Incidents like that tend to dissipate any aura around them in my eyes. These people are not Gods, they are not divine and they did not spring from the head of Zeus.

Investors will usually deny this effect, which can be subtitled "cult investing," but if you read between the lines you will see it is true. These analysts and pundits let you down before when it came to Internet stocks, and they let you down when it came to Real Estate. Are you going to believe them this time? Remember, Growth always disappoints in the end.

The misinterpretation of information usually by twisting it intentionally.

There is an entire cottage industry of analysts and talking heads whose job it is to manage and shape investors thoughts. If, God forbid, any bearish or contrary ideas begin to bubble up to the surface, it is their job to squash it in its womb, so nothing will impede the march of the Bull. As contradictory and bearish evidence begins to mount during the late part of a cycle, this becomes more and more difficult to do. This is the Wall Street equivalent of "spin control" in politics. Here is an example:

China and other Asian countries have partially removed subsidies on products refined from Oil, and sold to its citizens, many of whom have been shielded from the soaring cost of oil, and the resulting soaring cost of gasoline.