FEAR IS A BAD DRIVER
June 4th 2008 00:00
Posed to attack or posed for the cam?
Don’t even ask why I am quoting Carnegie here. I know he was into those self help books. He became more popular because of his work on how to win friends, but in a place where we can win or lose millions or billions of money (depending on how the chips will fall) we better have all the help that we can get.
With all the references to forward, backward, upward or downward movements that are usually attributed to it, in reality, the market is actually inert. Leave it alone forever and it just sits there forever. It has to be inspired or driven for it to go a certain way. And it will serve best the investor to know what is driving it at any given moment, or where it is getting its inspiration to move that particular way.
The experts call them the Market Drivers.
Well, you know me. I am the guy who always wants you to learn more. So, if you want to dig further about those Market Drivers, hit the books or take a trip to the library. You can surf the web too, if you think that will suit you best, just don’t leave that knowledge too far down the surface when you get back to do the trade.
You can take your pick, but to me, Fear is the trickiest of all the drivers. This thing exposes you to a lot of machinations. It makes you rather gullible or downright dumb, stupid, brainless, obtuse, dim-witted... Darn! There’s a long list of those adjectives out there. You don’t want to be any of them. Rather than do that, why not just send your money to the downtrodden and the oppressed? That way, you wouldn’t feel bad that you’d been tricked.
Getting tricked however, is not even half of that bitter pill that you’ll have to swallow if you lost a lot of money. The most acerbic taste would come from the fact that it was you, not the tricksters that made it happen! Pretty soon, you’ll know that you could have prevented them from taking your money. Worse, you could have just sat there and did nothing and you would have kept your money.
Fear is your biggest deceiver.
If the photog wasn't so scared, this pic would be clearer
In the stock market lingo Fear is the opposite of Greed. Greed can deceive you too by making you believe that the price of even the worst of all those shares can be more expensive than the priciest gems. Well, without any basis, only greed can make you believe it.
As already mentioned in my earlier posts, greed can drive the market up. But not because the prices are going up, you are already assured of earnings. Not if you get in near the top or right at the peak of the prices.
Remember that there are people in that market that makes money wherever the market goes. It follows therefore, that there are people in that market that are losing money whichever way the market goes.
In a robust environment where all the prices are going up, a snippet of news that says China’s market sneezes (as it was catching cold) can send a shockwave around the world that causes your shares to burn.
Greed can lose you money, but fear might lose you more.
Better learn how to take clear pictures then
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Comment by Fobzy
Fobz
Isn't the market about bulls and bears?
Comment by Market Newbie
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Comment by Anonymous
No I'm not an american investor but a european international investor who sold his stocks in the Phil Ex in October and I've been asked to contribute here as I make a living doing this. Why did I sell in October? Partly because Warren Buffet sold Petrochina signalling a time to take some money off the table as US statistics started to worsen as the credit crunch began to bite.
The first lesson to learn about investing here is that we are buffetted by world events whatever the earnings results locally. Few markets can ignore events in the US and certaintly the Phis EX is not one of them not least because Americans make up a large proportion of the investors.
Some of you must have thought the local market had hit a bottom of 2,650 as it has since risen and largely held at 2,850 but this week has seen renewed fears in the US of financial weakness and just wait for Friday's US employment figure to affect sentiment all over Asia next week. Beyond that the US may be slowly getting through the credit crunch but the wider recession may start to bite later this year sending US markets down another 10 -15%%.
Finally most South East Asians bourses have recently been downgraded on commodity inflation fears ( food and fuel) which may wel lead to local interest rate hikes and hence lower consumer spending. For this as well as the above reasons I do not think that now is a good time to buy into the local market and so better to take a look at valutions at the end of the year, when the US may be looking forward to a more prosperous 2009 after a pretty disastrous 2008.
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