From Aaron: “You say you ‘weren’t feeling very bad’ about Monday’s 554-point drop in the stock market ‘because some people who have no business being in the market might be sufficiently scared by this mild jolt to get out ….’ Could you explain what you mean by ‘people who have no business being in the market’? I think everyone feels this way from time to time: ‘Do I really belong in the stock market?’ — particularly after days like that.”

I meant: Novices lured to the market because it got so expensive and who will get scared and disgusted and sell out if it tanks. Lambs to slaughter.

Versus, say, those who are in for a lifetime of steady investing, and who seek companies and/or mutual funds that represent value. My hope was that latecomers attracted by a lively game of musical chairs — and especially those who may have borrowed against their homes or credit cards to play — would get scared off before the music really stops, should that happen.

I’m not predicting collapse any more than I could have predicted a tripling of the Dow when President Clinton was elected. But ‘irrational exuberance’ has a way of hurting the irrationally exuberant more than it hurts those who’ve been around the block a few times.


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