Fear and greed are the two driving forces in any market. Greed inflates prices: it causes more and more people to jump on the bandwagon and buy the stocks, commodities or tulip bulbs and push prices to a level where they are no longer sustainable and become a bubble.
When greed beats the market; no one talks about fear. Greed completely outshines fear, and the fact that people tend to have short-term memories also does quite a bit of good. In times of bull market rallies, people forget what it was like a few months or a few years ago and what it meant to be afraid.
During the housing bubble, investors forgot about the fear and panic that accompanied the dotcom bubble. This time is different, everyone will tell you. The fact that the market crashed and crashed just a few years ago doesn’t help keep things in perspective and the market is headed for yet another crash.
This is just human psychology, and it has nothing to do with the country or even the century you are in. The first speculative bubble was recoded during the 1600s in what is now the Netherlands. It is recorded that prices reached such a high level that at one point: 12 acres of land were offered for a tulip bulb variety!
At that time, greed was at its peak and had completely eclipsed fear. One of the reasons given by historians for the high prices of tulip bulb contracts was that people hoped that there would be a parliamentary decree that would void the smaller tulip bulb contracts and limit the buyer’s risk.
During the dot-com bubble, greed was fueled by the assumption that the old business cycles don’t apply to new technologies and that the Internet will completely change our lives.
Whatever the reasons: when greed takes over the market, it completely eclipses fear and makes people forget how scared they were a few years ago.
Past greed and future greed
Fear works the same way, and when fear takes over the market, it overshadows it. future greed and exaggerates not covet.
People have lost a lot of money in the current financial crisis, and they attribute much of it to the greed of Wall Street bankers, hedge fund managers, real estate brokers, and the like.
On all sides there are cries about how the greedy people of Wall Street have ruined Main Street’s savings. Fear has taken over the market and greed it is the guilty
However, people are not talking about future greed, in any case, not yet. No one asks: where will the next bubble form?
The markets are gripped by fear and blame it on past greed, but that completely overshadows the fact that there will be greed in the future.
There are some seasoned investors who are talking about where the next big move will come from: green energy, gold, agriculture, emerging markets, etc. but his voice has been crowded out by the cries of fearful investors.
Greed and fear work beautifully together and complement each other perfectly.