We are seeing it happen again today that the herds are going to slaughter regardless of how intelligent they claim to be, no matter their titles, their buildings or their size; Bear Stearns, Lehman, Indy Mac, Fannie Mae, Freddie Mac, Country Wide, AIG, and their investors have all been using the herd mentality to make financial decisions and all are going to slaughter due to their inability to think independently and apply common sense and ethics to their economic decisions.
The supposed "great minds" in the business world going overboard again, unable to think independently, apparently incapable of making common sense logical survival decisions and all being punished equally for their stupidity. The marketplace never discriminates, it is completely bipartisan and relentlessly disciplines those that refuse to discipline themselves.
Wall Street, the banks, the hedge funds and the individual investors (hopeful gamblers) have again violated basic common sense investing principles in fear of missing out on what appeared to be "easy money". The big boys (Wall Street) using other people's money with complete disregard as though they are at a casino doubling down, over and over, thinking they will never roll a seven. You don't need a Harvard business degree to define stupidity, nor do you need a course in leadership to watch these robots follow each other right off the cliff.
Some of the obvious violations: using maximum amounts of leverage, using multiple lenders, over-valuation of values, betting on future values, no emergency plans and basic lack of understanding of the business itself. Individual investors blindly investing and violating the same rules will also be punished because of their irresponsible decisions, lack of research and turning over their finances to those they don't even know. You can blame it on a lack of regulation, but the reality is it is a lack of responsibility with regards to money and investing. This is one of the things that makes the IRA's, Keoughs and Mutual Funds such vulnerable vehicles for the individual investor.
The world has come to overvalue expensive degrees, titles and big company names and undervalue the ability to think logically and independently. Everyone knows there is no such thing as get rich quick yet the "masses" continue to invest in hopes of it.
After the Savings and Loan debacle on the late 1980's the banks swore that over leverage of the magnitudes of the 80's would never be repeated. And they were right. The next time, now, it would be done on a much more global level and a grander scale.
The individual investor needs to heed the following policy: never, never, never follow the masses with your investment dollars, and it is better to miss profits than later miss your capital.
While the brains on Wall Street and the banking community may be better educated and create the appearance of knowing more because of their big financial terms and fancy titles, understand that when the masses start moving in any direction it will always be over-done, it will always end badly and neither their education nor their titles will save your investment dollars!
The investor needs to immediately reevaluate all of his investment and make sure he fully understands and can easily explain exactly where and what his investments are. If you can't tell me where your money is invested, what products they produce and how they make a profit you need to get out of that investment immediately. If an investor is willing to continue to blindly trust others with their money, and act completely irresponsible in doing so, there will always be others that are willing to lose your money.
The Herd Mentality is financial death to all that employ it. What we are going through right now has been caused by only a handful of things!
-- Greed? Yes.
-- Unethical? Absolutely.
-- A lack of regulation? Maybe.
-- A void of common sense and independent thinking? Massive and rampant like a contagion of pandemic proportions!
Logic has been cast aside for hope of missing out on profits and too few willing to stand up and be a voice of reason!