I recently read an article about a man who liquidated his entire investment portfolio in 2008, just after Lehman Brothers collapsed. He was convinced this was the end of capitalism and that currency would be worthless. To protect himself he converted everything into gold.
While I can understand the fear that drives someone to sell their holdings when the value of their stocks is rapidly declining, I fail to see why some people perceive that certain world events would possibly put them into financial danger with no hope for the future.
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I witnessed completely irrational behavior (to me, anyway) on two occasions.
Quebec referendum
On October 30, 1995 the separatist government of the province of Quebec – the Parti Quebecois – held a referendum to ask voters in Quebec whether they should secede from Canada to become an independent state.
Several days previously, a customer of the bank I worked in, afraid of a “yes” vote, cashed in all his holdings and purchased gold at around US$400 per ounce. He probably would have made out like a bandit if he would have held on to the gold, but instead, he sold it at a loss a few months later.
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Y2K
The late months of 1999 had everyone in a panic. People thought that all the computers in the world would crash the instant the year 2000 began.
TV infomercials sold millions of gadgets that you could attach to your kitchen appliances so that your toaster or coffee pot wouldn’t implode on January 1st. Canadian Tire sold out of generators before fall.
The media were in a frenzy of predicting doomsday scenarios and let’s face it, people were worried.
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In late December a customer of ours liquidated everything he had, purchased a bank draft for the total amount (including what was in his chequing and savings accounts), and placed the draft in his safety deposit box.
The end of the world
According to the ancient Mayan calendar, our world will end in December of 2012. The media loves a disaster story, and no doubt will soon be interviewing the doom and gloom experts and reporting on every perceived change in climate and the environment with a “chicken little” fanaticism.
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Will people again start to panic, convinced of the impending Armageddon? Will they attempt to protect their families by converting all their assets into gold? Will they rationalize their actions and consider them to be perfectly reasonable?
Maybe I’m just a fatalist, but for me it will just be business as usual. What about you?
