We can assume the events in London this morning were Terror attacks:
The explosions in a London subway as well as on three double-decker buses were said to be simultaneous, and came during the morning rush hour — the same time as the 9/11 attacks (Note that the Madrid Bombings were during the morning rush hour). According to a "senior Israeli official," the British police told the Israeli Embassy in London minutes before the explosions that they had received warnings of possible terror attacks in the city. Add to that these events came the day after London won the host role for the 2012 Olympics, and the conclusion that this was a terror attack is hard to avoid. (There are no coincidences).
With the Dow Futures down over 200 points, take a deep breathe and relax. Its still very early in this event, and the details of damage, injuries and fatalities are yet to be determined.
The loss of life is tragic, but giving in to fear — the primary weapon of terrorists — plays directly into their warped pathology.
As we have discussed before, these news events roil markets temporarily. Gary B. Smith had previously looked at several past events of this magnitude — JFK assassination, Pearl Harbor, etc. — and discovered that markets tend to temporarily wobble, and then return to their prior behavior. Given the size of the Global Capital markets (100s of trillions of dollars) we saw that even 9/11 caused a temporary aberration. Its hard to even pick out 9/11 on a 10 year chart of the Nasdaq.
So don’t panic or make any decisions based on your knee jerk emotions.
September 11 is hardly viewable on a 10 year Chart:
click for larger chart
Looking to the Past for Guidance
Gary B. Smith
TheStreet.com, 09/15/2001 11:40 AM EDT
From R. Douglas Van Eaton, CFA, professor of finance in the
College of Business Administration at the University of North Texas, discusses common investor errors:
Fear of regret/pain of regret
Myopic risk aversion
Van Eaton notes" A better understanding of the psychology of investor mistakes can
reduce their effects on investment decisions. Here is a list of the
most common psychological effects, and how you can reduce their impact
and incorporate them into your own investment decisions."
The full piece is below.
The Psychology Behind Common Investor Mistakes
R. Douglas Van Eaton