Paper Profits
Princess Gwen here, after what I only just realized was three months away. This princess was watching the stock market take off like a rocket. Indeed, we now have the market going parabolic. If there's one thing I will NOT trade, it's a market when it goes vertical. People go a little crazy when things get to these points. If you find people screaming that a market can never go down, it's usually a good time to check your parachute, and make sure you know where the exits are.
I just heard someone today ask about setting a stop loss to sell their stocks. I realized this means people are starting to become aware that things have done nothing but go up for the past three months. At first, they say this is normal. Markets were correcting upward. But then they keep going up. If you're still holding, at some point you reach the uncomfortable realization that all that profit in your holdings is paper profit. It's not worth anything until you sell. And the higher things go, the more people war between greed and pragmatism. Bull markets end when pragmatism just slightly overwhelms greed. Likewise, bear markets end when hope slightly overwhelms fear. Once that balance tips, everyone realizes all at once that their paper profits are in jeopardy if they don't act NOW, which causes a cascade effect.
I had thought this would be a bear market akin to the last one in 2008, but now I think it will be an absolute loss. Really, this vertical move kind of cemented it for me. The thing that follows a market like this is a complete and utter selloff. Where stocks are rendered valueless. Where nobody wants to hold a stock, because their value is only going to go down. The complete reversal of the sense now, that their value will only go up, forever.
I just heard someone today ask about setting a stop loss to sell their stocks. I realized this means people are starting to become aware that things have done nothing but go up for the past three months. At first, they say this is normal. Markets were correcting upward. But then they keep going up. If you're still holding, at some point you reach the uncomfortable realization that all that profit in your holdings is paper profit. It's not worth anything until you sell. And the higher things go, the more people war between greed and pragmatism. Bull markets end when pragmatism just slightly overwhelms greed. Likewise, bear markets end when hope slightly overwhelms fear. Once that balance tips, everyone realizes all at once that their paper profits are in jeopardy if they don't act NOW, which causes a cascade effect.
I had thought this would be a bear market akin to the last one in 2008, but now I think it will be an absolute loss. Really, this vertical move kind of cemented it for me. The thing that follows a market like this is a complete and utter selloff. Where stocks are rendered valueless. Where nobody wants to hold a stock, because their value is only going to go down. The complete reversal of the sense now, that their value will only go up, forever.
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