The current situation in the markets is now being compared to the great crash of 1929. When I read that, I quickly ran towards my window to check for pandemonium. Alas, to my great relief, everything seemed fine and the sky was not falling.
One of the primary reasons for such great volatility is that people are afraid and uncertain. If I owned a substantial amount of shares, upon reading the media, I too would sell everything. That I believe, is the problem. With all the headlines with the headings such as "Market Crash Shakes World" and "World in Turmoil," we are automatically instilled with fear. Individually, as investors we can be rational, but as a population, we do things that are clearly irrational and have the organization of a herd of flamingos. Let us illustrate this with an example, yell "fire!" in a crowded shopping mall, and you could potential have a stampede. Would people stop to ask, where, why, and what? All it takes is for one moron to lose control and chaos arrives. In my opinion, it is the same principle with the financial market. You read the headline "Market Crash" and some investor starts a selling frenzy and others follow suit. Of course it is inherently much more complex than that.
The financial media plays a great role and naturally can offer solutions and hope for the markets. Of course numbers don't lie, and when a market is doing badly, you can't help but yell "sell." What I am trying to say is that the media has an effect and the power to lessen the blow of the markets.
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