At the first rumors of war, timid investors in various government stock, being panic-stricken, sell out, to their loss and the gamblers' gain.
Sentiment: NEGATIVE
Successful investing is anticipating the anticipations of others.
When war comes, two things happen - profits go way, way up and all perishables go way, way down. There becomes a market for them.
The first thing I ever invested in was Twitter. Blaine Cook, former CTO, was leaving the company and asked me if I wanted to buy his stock.
But successful investors tend to be not too self-destructive. They tend to be patient, they tend not to follow the crowd, and they tend not to be too guilty about winning.
I could never gamble on stocks and shares because I saw my father get hurt that way - he lost quite a lot of money when the stock market collapsed in 2001.
Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed.
The chief problem with the individual investor: He or she typically buys when the market is high and thinks it's going to go up, and sells when the market is low and thinks it's going to go down.
People often panic when the markets go down and sell off their stocks - but then they aren't in the game when the markets are doing well.
Investors have few spare tires left. Think of the image of a car on a bumpy road to an uncertain destination that has already used up its spare tire. The cash reserves of people have been eaten up by the recent market volatility.
What we need to understand is, one, that there are market failures; and two, that there are things like asset bubbles and irrational exuberance. There are periods of booms, bubbles, and manias. These things, if left to themselves, can lead to crashes, to busts, to panics.
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