The Stock Market’s Wild Ride

Let’s face it. There is no group more paranoid than stock traders. Stocks, like money, have on intrinsic value. Their only value is what people think they are worth.

There is a mathematical formula that can be used to predict the value of stock or price of oil or whatever. It is: Value = A * GREED- B * FEAR. Now all we have to do is figure out a way to measure GREED and FEAR and we can compute the coeficients A and B.

What this formula tells us is that when GREED exceeds FEAR, value goes up. Such was the case when oil prices recently spiked. It had nothing to do with supply and demand and everything with trying to make a buck on speculation. However once the market was perceived to “top out”, people started selling off their shares and profit taking took over. FEAR got the upper hand, and people couldn’t dump thier oil futures fast enough before they were worthless. Oil prices went into a power dive back to their previous levels.

My prediction. People will get used to the economic crisis. All other things being equal, FEAR will become less of a factor. GREED will again become the dominating force in the market, and it will go up again. However, having been burned, GREED will me restrained by caution; at least for a while.