Corona Panic Part 2
Corona Panic Part 2
Mar 12, 2020 by Morgan Housel
Lots of things now seem obvious in hindsight. It’s so easy to kick yourself. Just remember that the problem with looking back at history is that you know how the story unfolds, and it’s impossible to un-remember what you know today when thinking about the past.
The reason things seem obvious in hindsight is because the world changed in the last week. And you can’t blame your week-ago self for not knowing how it would change.
Uncertainty shrinks your field of vision at the worst time. When the world changes in a 24-hour period it becomes hard to think more than 24 hours ahead. The year ahead is impossible to envision when assumptions you had at breakfastime were destroyed by dinnertime.
The irony is that long-term thinking is most powerful when everything is falling apart. The majority of long-term results are determined by decisions made during a minority of times, and right now is one of those times. It’s a tragic moment to become short-sighted.
It’s hard to know how you’ll respond to risk. If you asked investors two months ago what they’d think of a 25% market decline, most would say, “Ooo, bargains. I’d love that!”
But it’s easier to say it then than to do it now because two months ago you couldn’t contextualize things like your family’s health in jeopardy, or the potential that this could hurt your job security. Quoting Warren Buffett during a bull market is easier than being brave in the face of real-time worry.
Relative values are hard to deal with. The stock market today is still higher than it was in December 2018. It’s higher than it was in late 2017, when smart people were flabbergasted at how high it was.
But no one can say, “You should therefore still feel rich today.” That’s not how the world works, whether it’s rational or not. People judge their wellbeing relative to others around them, and relative to how they themselves have done in the past.
It’s OK to admit that we’ll get through this and that this is a big deal. Those are not mutually exclusive. It’s tempting to want to put yourself in one of two camps: pure panic, or pure optimism. The grey area feels uncommitted, which is hard to distinguish from unaware. But it’s probably the most reasonable position.
To continue reading, please go to the original article here:
https://www.collaborativefund.com/blog/corona-panic-part-ii/