Share market goes belly up - what would you do

I am not so sure about that. Greed and fear are countervailing forces that exist to bring balance to the force ... I mean, bring balance to markets. Greed and fear are in a constant tug of war, and it how markets figure out how to price things.

It is only when governments and central banks intervene to remove fear of financial loss (Greenspan Put, subsidies, lower interest rates etc) that greed overpowers fear.

Just a broad comment on this thread overall: when a stock market crashes, the wealth doesn't go to money heaven. It simply goes into different asset classes and to new owners. From over valued assets, into under valued assets; or from late comers to the equity markets, to those that previously liquidated their positions.

So when currency flees from equity markets, it is then drawn towards other markets.

Typically (but not always), in a crash, money leaves paper markets and head towards physical/tangible markets. It is easier to see the value of a tangible asset than an intangible asset in times of fear.

In 2000 when the stock markets crashed, the money left stock markets and lead to a 7 year bull market in real estate.

When the mortgage market crashed in 2008, that currency fled real estate and went into bonds and precious metals (gold).

Real estate is usually the ultimate asset of choice in volatile times, because real estate pays its dividends monthly not annually (so it cash flows). Plus it is a physical asset with obvious attributes mentioned on other posts ad nauseum.

Best,
John

 

So the bottom line is......we're all greedy. It's only a matter of degree.

And we all have a bias.

 

True true.

I don't really like the greed/fear debate.

There is an insinuation that greed is a product of or associated with capitalism, which couldn't be further from the truth.

As Milton Friedman said: was Mao not greedy? Stalin, or his inner circle not greedy? Socialism requires that powerful people direct the money of less powerful people - is that not greedy?

Greed is a human thing, not a western market thing. The difference is that capitalism forces people to use their greed to help other people. "Involuntary altruism" as they call it, exists under the capitalistic system.

 

Without greed and fear there is no opportunity.

The secret to successful investing or trading any market is controlling your greed and fear.

Willy