Face Masks and Extreme Greed…They’re Connected

I flew into Melbourne yesterday for the first time in a few months.

If you missed the story, with heavy hearts the family and I recently moved from our home in Melbourne to Wollongong (where I have family) to escape the tyranny of the Andrews government. The lockdown was just the start of it. If you think otherwise, you’re not paying attention.

Anyway, despite borders between Sydney and Melbourne opening a few days before, both airports were dead. This used to be one of the busiest air corridors in the world.

After arriving at Tullamarine, I was surprised to see the amount of people wearing face masks. Didn’t Dictator Dan recently decree that these were no longer compulsory?

Given the complete lack of evidence that the flimsy things that people wear have any effect on lowering transmission of a virus that has all but disappeared from Melbourne, I happily decided not to wear one.

On boarding the SkyBus to the city, I was the only one on the bus without one. (I realise that facemasks are to be worn on public transport, and most people were just following the rules. But the driver said nothing and there were no signs to that effect. If someone felt ‘threatened’ and asked me to comply, I would have done so. But thankfully no one did.)

I was thinking about the strangeness of this situation as we hurtled along the freeway at 100km/h, with no one wearing a seatbelt.

Everyone seemed scared of a non-existent virus, but not at all worried about the much greater risk of having an accident on the road with zero protection.

Once in the city, again, there were loads of people wearing masks. And this morning walking to the local café to grab a coffee, more masks.


C’mon Melbourne!

Don’t succumb to the fear!

Get out and enjoy the sun and fresh air. As Roosevelt once said, ‘the only thing you have to fear is fear itself’. As Ramesh Thakur recently wrote in The Spectator:

Lockdown fanatics are mostly evidence-light and data-poor. Consider this: Australia’s Department of Health reported that at 31 October, just 36 flu deaths had been recorded for the year. There were 943 flu deaths for the same period last year. The total number of Covid-associated deaths are 907. If you add 36 flu deaths, the total is, wait for it: 943. Coincidences don’t come any more interesting than this.’

Now, I’m not saying this virus is just a nasty flu. But it’s not the Bubonic plague either.

Governments would have you believe it is though. Fear is the currency they love to print. And Andrews does it better than most.

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Our brains release chemicals that promote fear and greed

Unfortunately, we humans are wired to succumb to it. The same emotional impulse that makes us wear masks when we don’t really need to, sees us dump gold despite it being a proven store of value for millennia.

Or, on the other side of the emotional ledger, it sees us buy tech stocks at ANY price. I mean, look at Tesla…

Port Phillip Publishing

Source: Optuma

[Click to open in a new window]

This is just fear turned upside down. Which is also known as greed.

Again, we’re wired to succumb to this stuff. Our brains release chemicals that promote fear and greed. We evolved these responses because they promoted survival. But that was before stock markets become a thing. Now, these chemicals can get you into real trouble.

The only real answer to this is to be aware of it.

When you feel the impulses of fear or greed trying to force an investment decision on you, get up and walk away. Go for a run. Do some exercise. Just don’t act on it.

CNN is a basket case of an organisation. But they do have one useful indicator…the fear and greed index. And right now, it’s flashing extreme greed:

Port Phillip Publishing

Source: CNN Business

[Click to open in a new window]

The indicator has seven inputs. Here’s the description of each from the website, with the current reading added.

Stock Price Momentum: The S&P 500 (SPX) versus its 125-day moving average (Extreme Greed).

Stock Price Strength: The number of stocks hitting 52-week highs and lows on the New York Stock Exchange (Extreme Greed).

Stock Price Breadth: The volume of shares trading in stocks on the rise versus those declining (Extreme Greed).

Put and Call Options: The put/call ratio, which compares the trading volume of bullish call options relative to the trading volume of bearish put options (Extreme Greed).

Junk Bond Demand: The spread between yields on investment grade bonds and junk bonds (Greed).

Market Volatility: The VIX (VIX), which measures volatility (Neutral).

Safe Haven Demand: The difference in returns for stocks versus treasuries (Extreme Greed).

Please don’t misinterpret what this is saying. It’s not predicting a crash. But it is saying that in the very short term the market is extremely stretched to the upside. So don’t be surprised to see the rubber band snap back in the weeks ahead.

If this recent rally has made you regret your conservative exposure to stocks, fight the greed impulse to get on board now. Write down somewhere that you intend to increase your allocation when the correction comes.

Because when it does, you’ll need a reminder that you wanted to load up on stocks in the first place!


Greg Canavan Signature

Greg Canavan,
Editor, The Rum Rebellion

Greg Canavan approaches the investment world with an ‘ignorance is bliss’ philosophy. In a world where all the information is just a click away at all times, Greg believes we ingest too much of it. As a result, we forget how to think for ourselves, and let other people’s thoughts cloud our own.

Or worse, we only seek out the voices who are confirming our biases and narrowminded views of the truth. Either situation is not ideal. With regards to investing, this makes us follow the masses rather than our own gut instincts.

At The Rum Rebellion, fake news and unethical political persuasion are not in the least bit tolerated. It denounces the heavy amount of government influence which the public accommodates.

Greg will help The Rum Rebellion readers block out all the nonsense and encourage personal responsibility…both in the financial and political world.

Learn more about Greg Canavan's Investment Advisory Service.

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