Tuesday, January 20, 2009

Fear and Greed.. Or Is It?

It is generally accepted by all that the markets are ruled by fear and greed and that fear sells and greed buys. In other words, as I've said oft before, fear capitulates, greed accumulates. But what if what I propose now is more correct; that is it's fear either way.

It is fear that makes us accumulate; a fear of losing out. And it is fear that makes us capitulate; a fear of losing what we have accumulated. It's why we buy insurance. Everything in modern society is really advertised on making you fear. The insurance business has made a sale of security for hundreds of years, but never as much as today. And to what end? Has it made you more secure? I propose not, in fact I propose it's just made you more fearful; can you buy enough insurance?

When you're born onto this world, and you happen to be born on American soil, you get a guarantee of inalienable rights under the U.S. Constitution, with no guarantee of security written there. But that's more than what you get under God's law, which guarantees nothing except an afterlife, dependent on behaviour. If you are an atheist, you don't even get that. So where is there a guarantee of security? Nowhere and I submit to you, that it is a natural law that there should be none.

I think that if someone could guarantee security we would not survive in the long run, or at least not survive happily. There would be no reason to. Why invent, innovate, conquer, triumph if you are guaranteed security? The nature of all living things is to thrive and grow, to become the best of what we are. In other words, compete which requires risk not security. The strongest lead, the others follow but only for the feeling of security. No? There's security in numbers and most likely the feeling of belonging. Can you really buy insurance and feel totally secure? There's always someone or something willing to challenge you, take you on and take your place, no matter how much insurance you buy. Insurance only cushions if you get to collect because what you've lost in order to collect is gone regardless.

As traders we flock together for the same reason, and follow those we see to be the leaders for the moment all out of fear. No matter which fear, we take on the role of leaders and followers all in pursuit of making a successful trade. Yet there's no insurance nor assurance that we will succeed where others have, otherwise the fear would subside. So perhaps it's really fear and security which is ultimately fear nonetheless.

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