Fear Trumps Greed as Market Woes Paralyze Economies

Fear Trumps Greed as Market Woes Paralyze Economies

www.bloomberg.com

Greed and fear are the emotions that rule markets. Fear is winning.

U.S. and European stock markets fell yesterday, even after the Federal Reserve lowered its benchmark interest rate in concert with central banks in Europe, Canada and China.

Investors are in the grip of a panic that psychologists and historians say isn't necessarily rational and may intensify. They aren't buying stocks, and more importantly, suddenly afraid they won't be repaid, they aren't making loans by buying bonds. Banks have also tightened credit. Today's fears, however, have reached an intensity that magnifies every additional piece of information and creates a vicious circle, according to Hersh Shefrin, professor of behavioral finance at Santa Clara University in California.

Wall Street's so-called fear index, the VIX, measures the cost of using options as insurance against stock-market losses. It reached an intraday record of 59.06 today.

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The old truism that the financial markets are ruled by greed and fear has never been more apparent. Banks are sitting on assets, afraid to loan to anyone, creating a liquidity crisis that is causing the world's central banks to also panic, dropping interest rates and announcing unlimited funding to stem the panic.

But such unprecedented moves only re-enforce fears that the world economy is in dire crisis, leading to a downward spiral in confidence and growing fear. The confidence that is the basis of economic interactions is undermined and a fortress mentality develops. And the central banks are forced to ever-more desperate measures to try to overcome it. Leading to...well, you see the downward spiral in action.

www.bloomberg.com
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I guess I'm selfish.

I don't have a mortgage. I don't have ANY debt. I don't spend money on "bling". I don't have a portfolio.

I do have camping gear. I do have the knowledge and skills to "rough" it. I have taken care of myself so If I have to walk to work because the bus company can't afford to run buses I could.

If I lose my job I do have a realistic plans to cut WAY back, I do have my CV up dated. I am willing to take a smaller salary if it comes to that. I will survive without my job, if I have to.

I have no fear of the financial "crises" because I didn't buy into the the whole get into debt up to your eyeballs so you can show off your new Plasma TV to the neighbours and get a mortgage by the time you're 25 otherwise you're a loser mentality.