Popular investing talk these days is that the period from March 9, 2009 (the low of the market during the meltdown) through, say, mid-May, was the fastest/biggest up-move in the stock market ever. Or at least since The Depression. Or something like that.
I haven’t researched the truth of that popular talk, but it sounds about right to me. The market as a whole went up about a third in six weeks. That seems to me like some sort of record.
So let’s assume it’s true that this was a once-in-a-lifetime up-move, and then ask yourself this:
With all the pain and agony generated by watching your stored-money fall by one-third in a matter of months — it still generates a visceral response, doesn’t it? — how come the reverse move doesn’t generate commensurate comfort and pleasure?
There are lots of reasons why this is so. Some of them are math (a one-third down-move followed by one-third up-move and you are where? Do the math!).
But this blog is a place for short writings, so I won’t discuss all or even some of them. Instead, I’ll close with but one, brought to us by the financial behaviorist folks (they being the folks who disagree with classical economists, they being the folks who largely believe that we are all rational beings who, at least in the aggregate, always do the right thing for our own self-interest, so that the financial behaviorists instead believe that we are often our own worst financial health enemies).
The phrase is this: