Fear and Greed

[FarmerGeorge]

We are in a period of market fear. Now of course the fear may be justified, whether it be fear of 'credit freeze', or 'US recession' (or, god help us 'depression'), 'financial meltdown', 'stagflation' (not sure if anyone outside US has brought this up), or even the fear that entire financial system is on the verge of collapse.
But it may not.
History, of course, tells us that in times of market fear we should be backing up the truck and loading in all the good bargains we can find.
This time may be different. But it may not. I only write this because I have recognised the signs of investor fear in my own behaviour over the past couple of weeks and before anyone does anything rash it might be worth considering the true motivations.
Conversely if you are hanging on grimly waiting for the turn (like so many over levered bank managers struggling to sleep at night) it might be worth examining your reasons for this behaviour as well. Remember those shareholders who held Bear from $170 all the way down. They still could have got out a week ago at about $50. Now they get $2 (actually my guess is they'll get less but whatever).
I only wish I'd done the same examination 12 months ago for that other emotion that sometimes drives the markets.

[lakedaemonian]

We are in a period of market fear. Now of course the fear may be justified, whether it be fear of 'credit freeze', or 'US recession' (or, god help us 'depression'), 'financial meltdown', 'stagflation' (not sure if anyone outside US has brought this up), or even the fear that entire financial system is on the verge of collapse.
But it may not.
History, of course, tells us that in times of market fear we should be backing up the truck and loading in all the good bargains we can find.
This time may be different. But it may not. I only write this because I have recognised the signs of investor fear in my own behaviour over the past couple of weeks and before anyone does anything rash it might be worth considering the true motivations.
Conversely if you are hanging on grimly waiting for the turn (like so many over levered bank managers struggling to sleep at night) it might be worth examining your reasons for this behaviour as well. Remember those shareholders who held Bear from $170 all the way down. They still could have got out a week ago at about $50. Now they get $2 (actually my guess is they'll get less but whatever).
I only wish I'd done the same examination 12 months ago for that other emotion that sometimes drives the markets.

Well said.......

Personally, I'm in the doom and gloom camp, but sincerely hoping I'm wrong.

I reckon I'd rather display a bit more fear, than greed for the foreseeable future.....although I prefer to use the phrase...extreme caution.

If my returns are lower than optimal for now.......I'll accept that until the horizon is less opaque....so defense for now, and once the dust settle go on the offensive.

Running along the lines of your post, in my informal survey of investor confidence I've found a cocktail napkin correlation between those up to their eyeballs in debt screaming everything is OK, and those who've been quiely building cash reserves and retiring debt preparing for a storm.

Everyone is inclined to act(or even more often fail to act) on emotion at times.

I have the good fortune to have the time to spend on nutting out investment ideas...my plan focuses on % rather than $......that way it's just numbers rather than dollars for me to avoid the emotion.

So every time $ appears excess to immediate needs, it gets deployed according to the % allocation plan...no dramas!

to be honest the most emotional part of my investing is the research.......I find it incredibly draining at times with seeing so many negative signals in my own personal set of invesment indicators....the execution is easy for me.

Especially now.......easy......heavy cash or cash-like......I am having a closer look at CANRoys again...waiting to see what happens over Northern Spring.

[Hoop]

I agree ..a great post.
Actually two great posts

Two market drivers fear and greed.
So simple to remember, so simple to forget.
It takes a crisis to remember what one forgot

[FarmerGeorge]

I have a degree in Psychology (not many farmers can say that!) but still have trouble recognising emotional decisions. Unfortunately it is very easy to rationalise behaviour when we have so much access to information. All to often we can focus on certain information that backs up the decision we have already made. Very seldom do you say 'ah I'm just scared and confused and I'm out!', more often it's 'ah there is some bad news from Bear Stearns which has a legitimate chance of effecting my investment and I'm out'.

I'm not in the doom and gloom camp at all, and regard this as a fantastic opportunity and those who can should lever up and go hunting. I think the US Fed chairman agrees with me, unfortunately my bank manager does not.

[Dr_Who]

I am also sitting on the sideline waiting to pick up good quality stocks on weakness.

[Laxmi]

The commodity market has now plummeted. Gold is down over 5% and oil by a similar if not greater amount. The Dow fell by almost 300 points, a day after another large cash rate reduction by the US FED. (3-2.25) Markets in Australia and New Zealand have reacted predictably to the recent dramatic events. The ASX is down 3%, the NZX down ½ this.

Investors are likely to become blind sighted by the recent turn in commodity prices. Has the word started to sink in that a recession of some significant magnitude is now inevitable? I doubt it for now, although the number of followers of this scenario may be increasing.

Certainly and without any reasonable doubt, investors are now between a rock and a hard place as to where to place their next bets. If commodities are no longer such a hot item, what is the next ray of diminishing hope?

I have no idea since it seems to me that the unfortunate time has arrived when all available options of wishful thinking have been tried. Fundamentals are starting to weigh. Something has got to give soon.

[lakedaemonian]

silver spot 16.71 looks like another great long-term hold(maybe even a short-term trade) entry point.

I'm still a firm equity bear, commodity bull, Jim Rogers disciple

[Steve]

I'm still a firm equity bear, commodity bull, Jim Rogers disciple

It's life JIM, but not as we know it...

If someone wanted a quick read of Jim Rogers, what would you recommend?

[lakedaemonian]

It's life JIM, but not as we know it...

If someone wanted a quick read of Jim Rogers, what would you recommend?

Firstly, Google News search term: Jim Rogers lots of recent interviews there....youtube videos as well!

Have a look through his website: jimrogers.com

He has a few books out, you may be able to find them in your local public library or trademe:

http://www.amazon.com/exec/obidos/se...r=Jim%20Rogers

I recommend Hot Commodities & Adventure Capitalist

He's not for traders....he's focused mostly on long-term to very long-term investment trends and he's been kind enough to answer quite a few of my emails over the years.

[Steve]

Thanks for that. I will have a quick investigation of his views...