bayview wrote: avalpert wrote:
If the market wants to run around and act like crazy people, I have no compunction about taking advantage of this.
The market isn't acting like crazy people - it is acting like people that is adapting to an unexpected event with negative consequences.
I have to disagree on this. When I experience an "unexpected event", I hunker down and see what happens. I don't sell my investments at a loss. That's not adapting; that's panicking.
Well, I think a 'remain' vote and been almost fully priced in as all expectations (right up until Sutherland reported) were that that was how it would go. I think a 7% swing between the two end states isn't wholly unreasonable. If you want to say they were 'panicking' and acting crazy it would be the runup to the vote - but again, given what was known at the time I find it hard to argue it was unreasonable.
There have been many previous posts in the forums noting that Mr./Ms. Market does not necessarily react in a rational way, especially on the first few days of a major political/economic event. There is a huge element of irrational, emotion-based behavior in the setting of closing market prices.
Well let's be really clear here - Mr./Ms. market doesn't react at all and, while occasionally it is a useful way to describe what is happening, it can also mislead. Individuals certainly act irrationally (probably most of the time, the idea that humans are rational animals isn't well supported by science) - the market is a pure unemotional aggregation of humans irrational behavior. So yes, sometimes the aggregated view of the market will lean irrationally towards one side or the other - the problem is there is no way for us lonely humans to know when that is. The market was 'irrationally exuberant' for years, and that works on the downside too - it is easy in retrospect to say it was irrational, but in the moment you can either accept the aggregated view or think your individual knowledge is more rational in some way and act on it (but again, given what we know about actual human behavior, particularly when they think they are right, the odds that that is a rational reaction may not be so high). This is why systemic investment plans are such a good idea - they are there to combat your own emotional responses both when you are panic selling and when you are zealously buying.