People are generally highly predictable in their thinking and actions. It is because of this predictability that allows the “con man” to repeatedly successfully scam people using
nearly the exact same formula time and time again.
Every fraudulent “get rich quick” scheme is nothing more than a variation of the ones that came before. Do you think this is a new development beginning with Charles Ponzi in the early part of the 20th century? In the biblical book of Proverbs, the text reads: “Wealth gotten by vanity shall be diminished [King James Version]”. Scammers depend on a person’s vanity that they can beat the system. The New Living Translation puts the verse in more modern terms: “Wealth from get-rich-quick schemes quickly disappears.”
Why would a set of writings from more than 2,000 years ago include that warning if people were not subject to the same set of thinking and emotions as today?
Internet “trolling” may be the most interesting social development of the 21st century. While narrowly defined as “The art of deliberately making people angry by making a comment in response to their comment,” it goes far beyond that. We can agree with, disagree or even just ask a question to someone and receive exactly the response we expected, be it approval, anger or any other emotional reaction we want. We can do that because people are remarkably predictable. The same is exactly true for the stock market.
Large movements in the financial and asset markets as we have just experienced bring out an unsurprising attitude from investors.
A stock market that suddenly explodes higher sees investors wearing golden robes looking skyward as ancient aliens return with boundless wealth and endless peace. A “crashing” market puts investors in a medieval painting depicting the fires of hell and demons gnawing on human bones.
The reason for either of those scenarios is that investors are not prepared anymore than a social media user has thought ahead about being “trolled.” Ask almost any stock-market investor, and that person will tell you with supreme confidence that he or she has developed a clear trading strategy and has the discipline to do it.
The reality is—as Mike Tyson said —“Everybody has a plan until they get punched in the mouth.”
On the upside, the profit target was obviously way too conservative, and we need to hold on until we have doubled our investment. On the downside, too many investors are sure that, just because the engines are on fire and one wing has fallen off, the plane will land safely.
In any battle, hesitation is a killer. Of course, you can find countless examples of when taking time to count to ten—like before you respond to a troll—can be beneficial. But in a falling market, hesitating to duck is probably going to get you severely injured.
For the stock market, trade what you see, not what you hope you see. Falling prices will continue going down until they don’t, meaning you never know how low prices will go. Further, “He who fights and runs away, lives to fight another day.” And, by the way, the local stock market is a type of “bear trap.”
Certainly, you should have been on the sidelines and watching days ago. Prices will probably still go lower. But when this market begins its uptrend—and it will, soon—we will see the best profit opportunity since late-2011.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.