Tuesday, October 07, 2008

Human Psychology Enters the Economic Realm

Unfortunately, markets do not always act rationally. Human psychology occasionally kicks in and overwhelms logic. Greed can do that, and it creates bubbles. Fear can do it, too, and it can wipe out wealth in a heart beat. The fear has kicked in. If you have some extra cash, start considering when to buy in at the low ebb. If your cash is already tied up, all you can do is ride it out at this point. The herd has begun running toward the cliff, and if you join them in the sell off, enjoy your free fall, because the bottom is going to hurt.

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