Hello fear, my old friend. I knew you could not leave the people alone.
Fear is an opportunistic and hangs out in the alley with doubt, indecision, shock, darkness, evil and death. They make up a rough crowd that is never far away in this world — even if you live in the best penthouse found in Shanghai, New York or Houston.
Fear and panic rule the day as they have many times. Even when technology and facts should control the stock market and our hearts, a moment of doubt can sink whole companies and end careers.
How long does all that take? About as long as it takes you to spit.
Look at the stock market today. What is causing the scare in China in the past week that was not evident 2-4 weeks ago? The facts remain the same. The biggest difference is the analyst who decided China-based corporations are no longer a viable investment. Then the rumor mill and competition, fear spread the move of 1-2 analysts.
China’s market has lost about 25 percent recently. Fear and doubt have prompted the sell off there, and naturally the panic in that market has rolled over to other world stock markets, including Wall Street. The fall in the U.S. is the result of group panic, which is defies fact and common sense. Groups make people perform in odd ways.
Without the group in the area, studies show that one person may not panic. He or she may gleen the facts and act rationally to salvage a situation. But when placed with others who panic at a key moment, that same person will follow the leader and act rashly as well. He would rather sell his 100 shares of a solid company rather than hold it when others are selling as fast as possible.
While hard to comprehend from the retrospective classroom, panic is nearly inevitable in situations like this. It all comes down to doubt growing into fear growing into panic. Once you panic, smart decisions are gone, gone, gone. And so is your money if you played the fear game in August 2015.
Some days it seems being on the bench is the best place on Earth. Send in the clowns and end this irrational behavior, which is so reminiscent of rush-hour traffic on Interstate-10 in Houston. Going 70 miles per hour, one driver can cause accidents and gridlock by simply dropping their cell phone for 2 seconds and trying to retrieve it.
By tapping the brakes, they start a panic of “don’t hit me” hard braking in the lanes behind and adjacent to the distracted driver. Then everyone is slamming on the brakes and skidding or colliding with vehicles they never expected to meet this way. The chain-reaction accident is identical to the stock market panic.
Best advice to avoid such drama? Don’t drop your phone. And if you do, ignore it until the engine is off. For stock marketeers, don’t be a follower just because an analyst is scared of 1 company or sector. Drop his advice and don’t listen to him again until your engine has been silenced for good.