There seems to be a constant battle between theses two emotions going on in the stock market every minute of the trading day.  As a matter of fact it has gone on forEVER.

FEAR: this is much more the perceived event rather than the actual event.  We seem to listen to others when we do not know or understand ourselves.  It is an old, old favorite of mine to state that KNOWLEDGE ALLAYS ALL FEAR. This takes place in our everyday lives as well, whether it is playing golf, riding motorcycles, riding horses, etc.  Once we know how to do a particular activity, and have great confidence in the fact that we “CAN DO IT”, we perform many times better and it is much more fun.

It seems that when mankind is confronted with an actual dangerous event he suddenly becomes calm and sure and has the strength of 10.  This is the actual event not the perceived event. WE ALL WANT TO DODGE THE BULLET, but what if the bullet never comes???  All that anxiety and fear has been for naught.  The most important thing to take away from this is the fact that 99% of the time decisions made while under the influence of perceived-based fear are both wrong and very costly.  Very often when one asks one’s self “why did I do that” the answer is that you don’t even recall doing it or realize that it was a very DUMB thing to do. When fear replaces reason the results are NOT good.

About 40 years ago I read a little book entitled “THE CROWD” by Gustav LeBon. This is a small book that contains very large knowledge. I still have the book and every so often re-read the brown and dog-eared pages just to remind myself of the actions that are taken by a crowd instilled with fear.

GREED: This is a very powerful emotion.  Also, this seems to be motivated by “wanting to belong”. After all is said and done, this is the one thing that caused the demise of the Great Roman Empire.  This keeps us from the very smart action of selling at market highs (any market) as we want that last dollar.  Also, Bill, my neighbor, is still buying—why should I sell.  This is actually more dangerous than FEAR because it involves, not perceived, but an actual experience.  I will have more to say about greed later—suffice it to say, very loudly, GREED ALWAYS WINS IN THE BATTLE BETWEEN FEAR AND GREED.

As a quick aside: IT APPEARS THAT 2007 WILL BE AN ABSOLUTELY FABULOUS YEAR FOR THE STOCK MARKET.

Have a wonderful autumn season.