Markets are made up of people
Green phase: After a long bull market, everyone is euphoric, all-in on the hottest stocks, usually even the riskiest ones
Yellow phase: The first 5/7% drop arrives, all gassed, yet another buy the dip. The latecomers, who had not attended the party until before the decline, put everything in place
Orange phase: The market on the first decline lateralizes, then rises slightly. Everyone thinks “come on, now I get rich too”. The rebound closes below the previous high, another more serious drop arrives. 8/9%, then a slight rebound and then down another 13/14%. The phase of doubt begins, what can we do? Take the comparison between similar. Someone bullish (the market will bounce) someone bearish (it’s the new 2008).
Brown Phase: The market doesn’t care what we think, it keeps going down. We got to -20%, a “bear market”. The reporters arrive. The usual stocks begin, “500 billion in the stock market burned today”, “inflation knocks out the markets”, “investor panic”. Fear comes, at 8 in the morning when you buy the newspaper. Breakfast at the bar is awkward for you, you check (Investing) every 5 minutes, even when the markets are closed.
You start seeing other people’s posts and find that yesterday they started selling.
Oh no and … as soon as the market opens I start selling too, or maybe not? No, I wait a little longer, put that really bouncing and do I screw them all? I do it tomorrow …
Red phase: Tomorrow is worse than yesterday! The markets are at -25 / 30%. Yesterday I had to sell! I sell half, then I see. From a scalper you become a “long-term investor”, and you discover with great surprise that everyone has become one. The missing gurus, journalists make 5 out of 4 pieces talking about bear markets. If, on the other hand, someone writes that he continues to buy, you think he is a poor fool. You have lost 30% of your capital.
Black phase: The markets are not up, months have passed, that residual 50% is almost gone. You are resigned, in hindsight (if you had sold at the highest). Sell even what little you have left. In the meantime, long-term investors have returned to scalpers, only they have lost their last remaining money as well.
The markets are at -45 / 50%, only Warren Buffett and Charlie Munger are left, but they are no longer in their minds, they are elderly.
green phase: You start gardening. One day, you meet a new neighbor who invests in stocks. Every day he tells you how much his money is growing. The market in 6/9 months has recovered all the decline, too bad you weren’t inside. They’re all making shovelfuls of money, then one day you open the paper, and you read that inflation is dropping and corporate profits are splitting and markets are exploding. You like breakfast sideways, because this time you are out of it differently from before. You hear from that friend of yours on Facebook (NASDAQ 🙂 that this year the electric is going big, that it will be the next goose that lays golden eggs.
Those two coins left deserve revenge, I put everything into it, so I also recover what I lost before.
Yellow phase…
