Allow me to enlighten you…
- Joshua M Brown
- February 22nd, 2013
Why, all of a sudden yesterday, was everyone in both traditional and social media running around like the market had just crashed?
Allow me to enlighten you...
1. Nobody is trading stocks anymore, all of the most aggressive and vocal traders are doing options. This is how a slip of 1.5% on the S&P can feel and sound like there's some sort of major move afoot. These people you're
listening subjected to are 10X leveraged currencies, triple long ETFs or they trade out of the money front month calls, LEAPs whatever. If you were slingin' around 50 grand in play money all day, you'd be doing the same thing, it's fine.
2. Cassandras get the most attention - pretty much the only thing they want anyway. There's very little attention paid to everyone else who is simply going about their business or who remembers the fact that stocks are supposed to go down once in awhile.
3. Guys talking about being all-in or all-out can and will change their opinions quickly. This is what they should be doing as professional, full-time speculators. But are you a full-time speculator? If someone can and frequently does go from fully invested to all cash to fully invested over the course of a few days, is there any particular reason that you should be paying attention to them? Will they personally be calling you to give you the second half of their trade? Well, most of you don't realize this so when someone says "ALL IN" or "ALL OUT", it gets you talking, thinking, retweeting, sharing etc.
4. There is not much real news so in its absence our imaginations are running wild. We do this as a species, its okay. Gotta have something to talk about, right? A down day for stocks quickly becomes a crash these days given the state of our modern communications capabilities.
5. Some people selling services need you to believe that it is in your best interest to manically hop from foot to foot - and they are everywhere these days. If you're engaged in this kind of thing, I'll just assume that it's your profession or your hobby. That's cool, I have unprofitable, expensive hobbies too - golf, trying new restaurants, auto-erotic asphyxiation, etc.
Anyway, this is why people are acting the way they are. Do what the real wealthy people do - put it into context, be aware of it, and focus on the bigger picture of how you're going to accumulate more wealth and businesses and friends and art and experiences. Not on how you're going to avoid a 7% temporary drawdown in a stock portfolio.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.