FEAR Is Foundation of Financial Crisis, Not Greed- San Diego Business Journal Excerpt
October 22nd, 2008 categories: Community Happenings
Since my last column, a bunch of stuff has happened in the financial markets across the globe.
The stock market continues to boil like a pot of pasta. I think the infusion of capital, interest rate cuts and just about anything else someone comes up with will help guide us to a better comfort zone, but it will not happen overnight.
In the last two weeks, many experts have started to sound like they have been reading this column. The headline in an Oct. 3 daily newspaper read, “The financial crisis: It’s about fear, not greed!”
The headline in the Oct. 8 business section of a daily paper said, “Fear appears to have upper hand.” My sentiments exactly.
The question most of us would ask Warren Buffett, if we had a chance, is probably, “What should I do with my investments?”
He was asked that in a KPBS interview last week and he said this is the best time to buy stock because the prices are so low.
Most financial planners and brokers will tell you to sit tight and wait it out.
In most cases, the losses are only paper losses at this point, unless the company went out of business, so the real drop in your portfolio doesn’t occur until you sell the investment.
You probably should do as the experts are lamenting and just sit tight.
A recent “Fear not Greed” editorial stated: “It is true what is done is done. So why waste our time making esoteric arguments about the psychology of what went wrong? Whether it is Greed or Fear, who cares?”
Picking Up Speed
I do because the FEAR (False Evidence Appearing Real) is like a restrictor plate on a car engine. The market can only get revved up if it is allowed to pick up speed.
The article goes on to say, “We are not out of the woods yet. What went wrong is still going wrong. The most dangerous part of a bursting bubble is the impulsive aftermath.
As the housing bubble bursts, dysfunctional impulsive behavior climaxes because of the fear of losing compounds.
Typically, cautious people make mad dashes for the exits and trample good judgment on the way out. Until we address the root of the problem — fear not greed — we will continue shooting ourselves in the collective foot wondering why poor impulsive choices persist long after greed has disappeared from the equation.”
My last comment is taken from a quote in the lead story in the business section of an Oct. 8 newspaper with the headline, “Fear appears to have the upper hand.” The article states:
“Anybody searching for cause-and-effect logic in the daily gyrations of the market will be disappointed — even if the overarching problem of a crisis in confidence in the global economy is now becoming clear. Instead, the market has become a case study in the psychology of crowds, many experts say. In normal times, it runs on a healthy mix of fear and greed. But fear now seems to rule, with investors often exhibiting a Wall Street version of the fight-or-flight mechanism — they are selling first, and asking questions later.”
Other News
In other North County news:
• While the credit market is upside down just about everywhere, that is not the case in San Diego County. The Board of Supervisors just announced Sept. 29 that national rating agency Standard & Poor’s has awarded the county administration its highest rating, making San Diego the only county in the state with a AAA rating. Supervisor Bill Horn said it best: “The upgraded credit rating is the result of the unwavering fiscal management of the Board of Supervisors and their county management team.” According to the report, “the stable outlook reflects the county’s deep and diverse economic base, strong reserve levels, formalized policies, manageable dept burden and long track record of conservative budgeting where actual results typically exceed initial projections.” I give them an A-plus.
• Many of us are concerned about the ability of charities and nonprofits to get funding during the crisis. One North County merchant has a program that meets the continuing need for charitable donations in a unique way. Gems of La Costa owner Dale Condy started his program in the ’60s. Jewelry stores historically provide services such as inspection, cleaning and minor adjustments. They don’t charge for those services traditionally, but Condy had an idea. Sometimes his customers would leave a small sum of money on the counter as a tip for the free service. He realized that most of his customers appreciated the care and at the same time put a small value on it. So he placed a jar on the counter with “Charity Charges” on an engraved plate. When someone wants to leave a tip, the money goes in the jar and its contents are donated to local nonprofit groups. During the last 30 years, Condy and his family business can proudly declare thousands of dollars of badly needed money has gone to organizations in the area. Well done!
• The green movement is catching on all over the North County area. In that regard, most of the major auto manufacturers are selling alternative fuel vehicles. One of the limitations on the part of some buyers is the availability of special fuel. In Carlsbad, the first public fuel station for ethanol-fueled cars and trucks has opened at the Bressi Ranch Fuel Mart. Two E85 ethanol pumps began service Oct. 7. The Shell gasoline station and Circle K market are owned by Fred Reed, who owns ADC Asset Management. Several multifuel vehicles already are regular customers.
Ted Owen is president and CEO of the Carlsbad Chamber of Commerce.
