Monday, August 08, 2011

Greed and Fear and Finance

I've been watching the stock market go nuts.  Since I don't invest in the stock market because I think it's just about guessing which way the sheep will run, I'm not personally affected.  I took a tiny bit of time to check in with CNN and Fox to see what they were saying about what was going on.  All I heard was the blame game and guesses as to why what was happening was happening.

I would love to see some psychologists make a study of what drives investors to buy or sell.  I'm guessing it's not about the logical, rational stuff the media thinks it is.  I'm guessing it's more about emotions like fear and character defects like greed.  When the market is going up, people buy stock (greed), and when it's going down, people panic and sell stock (which makes prices go down more).  What's goofy about it is that people who make money buy stock when prices are low and sell when they're going up.  That's the rational thing to do but since fear and greed seem to be the motivators...

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