By: Gary Wollin
One day, while Chicken Little was walking in the woods, an acorn fell and hit him on his head.
"Goodness gracious me!" said Chicken Little, "The sky is falling, the sky is falling. I must go warn everyone."
We see this all the time. The stock market goes straight up for eight or nine months, and if there are 2 or 3 down days in a row, there is hand-wringing and the moaning all over the place.
Who are these people that panic at the first sign of a downturn or with the slightest bit of profit taking?
The first group are people who get in the near the top and are now worried that their small losses will turn into big losses. Also, people who haven't invested in the stock market are in this same box. For many, many years they were wrong to not have invested, but now that the market has declined very slightly for a few days they would like the point out how smart they are and how dumb everyone else is.
Short sellers are the next group. Short selling is selling a security that the seller does not own but is committed to repurchasing eventually. It is used to take advantage of an expected decline in the security's price.
The press comes next. You have heard this before: "bad news sells newspapers."
[Read full article]
"Goodness gracious me!" said Chicken Little, "The sky is falling, the sky is falling. I must go warn everyone."
We see this all the time. The stock market goes straight up for eight or nine months, and if there are 2 or 3 down days in a row, there is hand-wringing and the moaning all over the place.
Who are these people that panic at the first sign of a downturn or with the slightest bit of profit taking?
The first group are people who get in the near the top and are now worried that their small losses will turn into big losses. Also, people who haven't invested in the stock market are in this same box. For many, many years they were wrong to not have invested, but now that the market has declined very slightly for a few days they would like the point out how smart they are and how dumb everyone else is.
Short sellers are the next group. Short selling is selling a security that the seller does not own but is committed to repurchasing eventually. It is used to take advantage of an expected decline in the security's price.
The press comes next. You have heard this before: "bad news sells newspapers."
[Read full article]
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