I’ve seen loyalty. I’ve seen deception. I’ve seen friendship. I’ve seen intimidation. I’ve seen responsibility. I’ve seen willful ignorance. I’ve seen generosity. I’ve seen arrogance. I’ve seen courage. I’ve seen cowardice.
And that’s just on internet discussion boards dealing with the topic of stock investing!
It’s humans who buy stocks. That rarely noted fact explains why the conventional advice re how to invest for the long term does not work. The conventional advice is rooted in an assumption that investing is primarily a rational endeavor. Humans are emotional. Since it is humans who buy and sell stocks, it is not possible for investing ever to become primarily a rational endeavor, no matter how much some ivory-tower eggheads might long for it to be so.
There are important things to study and there are easy things to study. Emotions are hard. Many stock analysts have elected to study only those aspects of the stock-investing project that are easy to study. We possess little understanding today of how our emotions save us or ruin us. We need to learn more.
Discussion boards are the perfect communications medium for studying the human side of the investing project. Many of the people who post to boards are human. Not all, to be sure. Humans are making new inroads at discussion boards all the time, however. I have heard reports that at some of the better administered boards, humans now comprise a majority.
You’ve heard that fear and greed are the two most important investing emotions. Greed prevails in bull markets, fear prevails in bear markets. What emotion do you get when a major bull is preparing itself for its journey to Bull Heaven and a major bear is still just learning how to walk and say “goo-goo-ga–ga”? What emotion pops up when greed is in the early stages of the process of being transformed into fear?
In the worst cases, hate.
What do today’s stock investors have to feel angry or hateful about? Plenty. Today’s P/E10 value is a bit under 28. The fair-value P/E10 is 14. If stock prices were to return to reasonable levels (it’s been known to happen), those going with high stock allocations today would see their financial freedom dreams go “poof!”. You would cry too if it happened to you.
The anger today is not directed at a price drop. Wer’e not there yet. The anger today is directed at explanations of why the economic realities require a price drop or to mentions of the historical stock-return data, which shows that big price drops have always been the result when we have found ourselves in similar circumstances at earlier times in history.
The point of today’s anger is to scare away reality. You can’t scare away reality. But it’s just the sort of thing that those darned humans would want to take a stab at all the same!
I hope that not everyone is feeling angry or hateful. If everyone is feeling angry or hateful, there is no one left to read this blog, which is guaranteed to be at all times 100 percent anger-free.
My strong sense is that most of today’s investors are experiencing mostly healthy emotions and would like to gain a better sense of how stock investing really works before it is too late for the new information to help them avoid the pain of the big price drop. Those investors are unsure of their footing, however, while the investors feeling anger and hate are intense in their conviction that discussion of the realities must be forbidden. So the investor emotions that matter today are the emotions of anger and hate. It is those who feel anger and hate who control the agenda, not just in the Financial Freedom Community but in the Big Bad Outside World too.
Hate is not a sound long-term investing strategy. Don’t let those feeling the most negative emotions block you from learning what you need to learn to become a successful long-term stock investor. Respond to anger with humor. Confront hate with compassion and concern (both for those who feel the anger and hate and for those at whom the anger and hate is directed).
Please try not to be too discouraged. I’ve sneaked a quick look at the last page of our little drama. Love conquers all in the end.