If Markets Coped With This Scare, They Can Cope With Anything…

Ebola. Russia. Ukraine. Iraq.

When the market needs an excuse to fall it often finds an excuse.

Investors have had no shortage of things to choose from as a reason to sell.

We like the Ebola story. It’s not the first time the threat of a major disease has smacked aboutthe market.

You must remember bird flu and swine flu.

Each time the market goes into a panic. The stock with the supposed ‘miracle cure’ soars. Then it crashes just as fast as it soared. Biota Holdings [ASX:BTA] shareholders will know what we’re talking about.

At first glance this kind of fear and calm cycle may seem like a good thing. After all, it keeps investors on their toes. But the reality is the opposite.

Each time a threat appears and disappears without it makes it more likely investors won’t notice the real threat when it comes.

And that will be a disaster…

You’ve heard the story, The Boy Who Cried Wolf.

It’s an old tale. A boy looks after the village’s sheep.

But he keeps running to the villagers telling them a wolf is attacking the sheep. They rush to see, only to find out the boy has lied.

This happens time and again. Eventually, when a wolf does attack the sheep, the boy runs to tell the villagers, only this time they don’t believe him.

The moral of the story is obviously to not tell lies.

Now, we’re not suggesting that people warning about the threats facing the market are deliberately lying. What we’re saying is that repeated calls about a market crash become gradually less helpful to investors. It’s desensitising.

For the simple reason that for all the claims about crashes since 2009, not a single crash has led to a market meltdown. In fact, today US markets are trading near record highs, and the Aussie market is trading near a six-year high.

How can that be?

People are a resilient bunch

For one thing, it has become clear that the crises the mainstream has highlighted and which the market has feared have turned out to be anything but crises.

That doesn’t surprise us.

We’ve explained this before. Having failed to spot the disaster that happened in 2008, the mainstream is now going for the scattergun approach.

If it predicts enough crises, it’s bound to get one right. Only it won’t. Because the mainstream still doesn’t understand why the last crisis happened. Until those in the mainstream understand that, they haven’t got a chance of picking the next real crisis.

But that’s not the only reason. There’s something else.

We’ll try not to get too philosophical here, but if history has taught us anything it’s that people are resilient.

Resilient enough to survive wars, famines, global warming, global cooling, diseases and goodness knows what else.

The great thing about people is the urge and the desire to make the best out of even the most dire situations.

It’s that kind of mentality that makes business and financial markets so exciting. You can see it everywhere in the market today. A seemingly insurmountable obstacle crops up somewhere in the economy and before you know it an entrepreneur has come up with a solution to get over the problem…or at least profit from it while supplying a product or service.

We see that happening all the time in the small-cap market. Tiny companies appear with a new idea, and the belief that they can change the market.

The fact is that as bad as things may seem, there is always an opportunity…even in the most unlikely of times and places.

Don’t sell, hang in there and buy more

One of the things that has the market on edge is the fear of war.

We’ve tried to explain that from a business and markets perspective (that’s what this eletter is all about, so don’t criticise us for taking that angle) wars and conflict don’t necessarily mean bad news for stocks.

Read the rest of this article at Money Morning