The post’s title may not lead directly to new energy and fuel, but markets and the prices they set, the value of money we use to trade and accumulate wealth are tools that can only work properly freed of fear.

There are two types of fear, learned fears and instinctual fear. They are both rooted in our core by either evolutionary rooting essential for survival or applied to our psychology by our creator, you choose. But fear can run away with us, called pathological forms of fear, that we just learn and then let lead our lives. In groups such as markets, its called mob psychology, in which a swing in mass sentiment can drive the lemmings over the cliff. It is so weird that some institutions program computers to trigger securities sales, called program trading in hopes that losses can be mitigated.

Learned fear is critical so as not to walk dumbly into fast moving traffic and other important skills for civilization and modern society. Left unmanaged or failing to teach our youth what appropriate fear is can lead to debilitating anxiety disorders, post-traumatic stress syndrome and raw depression. Many people live chronically stressed, based in financial issues that destroy lives, marriages and children’s development.

So, be careful of what you care about, learn to be safe. One thing that for many people is lacking – is the ability to identify, develop and exploit personal conditions of safety and security. This skill tends to be forced on people by the conditions of their time, and is essential for long-term survival and mental health. Most of us can still find relatives and friends who grew up during the “Great Depression” where the skills were simply learned by growing up in hard times.

What might some of those skills be? Foremost would be – to be careful what you care about. All political campaigning aside, the winning presidential candidate will be at the mercy of the Congress. Do we wish to take on the risk of one political party controlling both the presidency and the Congress? Do you really trust them or do you realize the mischief they can make? Caring about which person is president is nearly pointless unless that concentrates power in a cabal of like-minded politicians.

Another view is how important is that house or car? Is prestige so important? In uncertain times having expensive or wasteful prestige items might mean something just the opposite of what might be wished for – can you imagine anyone respecting the buyer of a gas guzzler or a McMansion now? Its much more important who respects you than what you have that might attract respect. Something is way wrong if you’re attracting instead of earning respect. A period of hard times might be difficult, but could do society a world of good.

We are always subjected to stress. Losing a job, a relative, a marriage, bearing the burden of having to move, or coming up short on the budget and a wealth of other potentials are negative stresses that can debilitate our health. But watching an emotionally engrossing movie or an exciting sporting event also is stressful. Its not that stress is bad, it’s the thinking we choose to have that determines the chemicals our brain’s release into our system that decide if we have a negative stressful event or not. A sports fan will have an even chance for a healthy stressful event, but a sports bettor has a better than even chance to have a negative one.

One has to develop an ability to identify, control and exploit the conditions of safety and security both for mental health and our survival. These resources such as an easily affordable mortgage, an inexpensive to own vehicle, quality food, and being well informed on staying healthy are conditions worthy of great effort and in truth the respect of everyone. Its not that you have something, but that you can handle nearly anything, which is worthy of other’s respect.

Money has become an open market item over the years. In the foreign exchange market you can see what your country’s currency is worth compared to the money of another country. As it goes up buying things from others becomes easier and selling becomes harder. As it goes down buying is harder and selling easier. Not hard to understand, but if affects nearly everything. The personal key is to have a budget that allows for having lots to spare instead of barely enough. Life on the knife’s edge can get you cut. But organizing to have spare budget room is safer, more secure and respectable.

Markets are simply places where sentiment determines what a price for traded things can be. Prices are set when a trade is made. Market bids tell us what someone will pay, offers what someone will take; the market only pares them up.

Today the blame is falling on the U.S. home market with some facts behind it. There are some mortgages not getting paid, some foreclosures, misery aplenty. But troubled mortgages are a small percentage. Most are getting paid. The worry is what are the securities backed by mortgages worth, the answer is the loan servicers, the mortgages securities managers and the investors are all to lazy to post the risks in each of the securities sold, so who knows?

Its not irrational fear – but justified, who dares buy a mortgage security? Is the one offered full of on time 80% mortgages or one with a batch of late, 100% loans? Who knows? The psychology, the learned fear of securities has spread to stocks, other bonds, commodities, and futures contracts.

Meanwhile the intrinsic value is forgotten, by everyone but the Warren Buffets of the world. There is getting to be a larger and growing stock of investments that can be bought for way less than they are worth.

It’s a good time to take stock, is it really time to be afraid? Or is there an opportunity here? Can each of us learn to and apply some sense in our lives, cure our pathologies and build family, our friendships and ourselves? Can we look out in the world and respect who deserves it or waste our thoughts on things belonging to others?

It might be time for a personal reality check on markets, money and fear.


1 Comment so far

  1. Registered nurse on November 9, 2010 3:27 AM

    Couldnt agree more with that, very attractive article

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