Gotcha! That's what the market said to all those investors who panicked and sold, out of fear, on the way down last week.
And guess what? The ones who panicked most were the professionals. They're supposed to know better. After all, they're paid to manage money in the markets. But it was the pros who executed those huge block trades just to get the financial companies off their books before the third-quarter reports go out.
The pros pulled millions, even billions, out of money market funds because they worried not only about Lehman Brothers paper, but about the entire corporate borrowing market.
Professionals around the globe panicked and piled into Treasury bills, pushing yields sharply lower, just as the Treasury was creating billions of dollars in bailout credit that is certain to swamp the value of the dollar -- unless, of course, it disappears down the black hole of defaulted swaps and writeoffs.
Ordinary investors became the, relatively speaking, smart money. Perhaps it was fear that paralyzed many people and kept them from selling instantly. Or maybe it was because they use mutual funds, and knew that the daily prices are set after the close, causing them to pause and pray for a rebound.This is not an argument that buy-and-hold always works. The impact of the financial crisis will certainly take its toll on the broader economy, and there's a good chance stocks will move lower to reflect that.
But it is an argument that smart investors resist those two emotions so closely tied to human nature: fear and greed. Greed got us to this point. Fear destroyed billions in assets instantaneously.