March 1, 2011 – A very odd thing is happening on Wall Street – people who you would expect to be putting their money into gold bullion are actually being drawn back to equities. “Many of the retail investors now getting back into stocks are the same people who bailed from the market just before the start of a historic bull run,” says Jason Zweig in the Wall Street Journal. “If they sold stocks because they couldn't stand the pain of loss, their risk tolerance wasn't as high as they once believed.”
So why are they once again being duped? “Behavioral science tells us that bankers and politicians are lying to us 93% of the time,” says Paul B. Farrell in Market Watch, and the same goes for Wall Street. But humans are prone to repeating mistakes because we are “driven by what psychologists call ‘counterfactual regret’ - the haunting sense of what might have been,” says Zweig. “The memories of loss in the financial crisis already are fading, while the regrets over being out of stocks are refreshed every day the market goes up.”
That’s why the Wall Street casino works. Individual investors invariably panic on the downside and sell just before the market bottoms out. Insiders scoop up the bargain equities and ride the upside until just before it peaks - precisely when timid individuals decide to get back into the game.
As Zweig reports, Golden Gate University business professor Michal Strahilevitz adds that investors are also driven by “the trauma of watching the market go up and realizing that they'd be better off if only they hadn't gotten out.” She suggests you think about going back to stocks and if it causes your heart to race, “then you're probably not being rational.”
What is rational is breaking the pattern. Instead of falling for the same old lies, put your money where you can feel secure – invest in gold bullion.
