People are rationally irrational

Ever since the first case of the 2019-nCOV discovered in Singapore on 23 Jan, the current number of confirmed cases stand at 40. The equities market, especially tourism-related stocks, have taken quite a hit. ‘Disease Outbreak Response System Condition’ (DORSCON) in Singapore had been raised to ORANGE (the second most serious tier) on 7 Feb 2020.

Human behaviour however has skewed towards the irrational path, which is rational yet puzzling at the same time.

Panic selling in the equities market

Understandably, the current situation has created a drop in confidence in the economic situation. One thing to understand is this, the drop has little or nothing to do with the fundamentals of companies. Quality companies are still technically strong; their share prices are just relatively depressed. Tourism-related stocks (e.g. hospitality, airlines) remain the hardest hit, which is still heading for the bottom for the tourism cycle.

Yet people are irrational. I am not referring to investors who got out early on the onset and to prepare entering the market latter at further depressed prices. Investors who are dumping their stocks on fear and rumours, chasing the market to the bottom by selling and up to the extent of staying out of the market completely — these investors have lost their logic, in my honest opinion.

It is in fact never a best time to begin accumulating in the market than now. Much wealth have been reported as “lost” during times like this; in reality, it is a transfer of wealth. Wealth does not just disappear or evaporate into thin air, it ends up in someone else’ hands, from the foolish to the smart.

The savvy long-term investors would have started or prepared to offload their warchests and snapped up the bargains. This is how some people become several times more wealthy and others fall into this investment trap, time and time again!

Panic buying in the super-market

Interesting, just 2 hours after the announcement of upgrade of DORSCON level to ORANGE, people have been swarming supermarkets to wipe out basic essentials such as toilet paper, cleaning materials, food perishables and even instant noodles. Fear and rumours have taken over once again.

I am pretty sure the minds of the people who started it out were visualising an “apocalypse” or city lock-down or wide-spread that causes families unable to leave their homes for weeks. And as “kiasu” Singaporeans who fear of missing out, people start to take on the group mentality and follow suit in the behaviour.

Empty shelves greets customers who possibly need these items more than the hoarders. For example, people who just need to buy some bread or cereal for their daily breakfast. My friend who gave birth recently could not get the greens she wanted for her meals nor the wet wipes to clean off or sanitise her baby stuff.

From these 2 examples, we see that masses follow what the masses think and do. And it is a behaviour that is rooted and hard to change. To these folks, we are probably the illogical ones. However, times have shown that people who progress positively do not react to fears, do not listen to rumours and do not not follow the masses. If there is anything you could do, it is to weigh in your own assessment and make sound decisions.

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