Sentiment, fundamentals….and panic
on October 26, 2008

Sometimes markets move because of sentiment, sometimes because of fundamentals. Sometimes (luckily rarely), because of blind panic. The latter is what we are seeing at the moment. Investors suddenly feel they MUST sell – whether because they need the cash, have completely lost confidence, or because their family and friends are advising it.
Whatever the reason, markets then crash. But these moments, contrary to popular belief, do not come out of the blue. After the blog itself was caught in 1987, it learnt to read the warning signs, and to move aside as the moment of maximum danger approached. Thus it was able to forecast on 7 September that ‘The price of all assets will go down’.
Deleveraging, which caused today’s panic, will still be with us once markets stabilise again. This matters to the chemical industry, as it tells us whether we are in a dip, or a downturn.

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