The financial markets are a reflection of investor psychology, rarely rational and often extreme. The two main feelings, frenzy and panic, are clearly visibleon an analyst's screen like tidal movements. Whether it's hot or bad news, the result can be quick and painful.

 

The frenzy spreads one person at a time, most often around the BBQ in the summer. But it is above all, the idea that our neighbor, or worse, our brother-in-law has better returns than us; this is what haunts people. How can he, who is less brilliant, make a lot of money with Nortel and not us?

 

Conversely, panic is special since it is as contagious as it is rapid. If we add an external element such as a war or a pandemic, the acceleration becomes incredible. This relationship appears when panic has taken over and people massively sell all their investments without considering the real risk.

 

I don't think I'm wrong in saying that the month of January was turbulent to say the least. Although no external event took place, the expected rise in interest rates caused a strong reaction from investors. The tensions in Ukraine probably exacerbated this, but it's pretty clear that we have seen and are still seeing panic in the markets.

 

“There is always a reason to worry when you own stocks” Warren Buffet

 

I now ask you to imagine for a moment that you find yourself in 1919. The 1^st World War has ended, leaving Europe ravaged and its economy weak. With this in mind, I'm offering you to buy shares in a fizzy, caffeinated beverage company at $40 a share.

 

The next 25 years would have brought you the Spanish flu, the Great Depression of 1929, the banking panic of 1931, World War II, the fall of France, and Pearl Harbor. Tragic events that would have panicked many reckless people.

 

However, on the flip side, you would also have seen your company increase its sales from 9,000 gallons to 390,000 gallons in the first ten years. In 1931, the company would have started one of the greatest advertising campaigns of its generation by linking its product with the image of Santa Claus. During the Second World War, the American government would have required your company to give American soldiers access to your drinks to support their morale. Moreover, since your initial purchase, your dividend has never been reduced or cut, regardless of the world events that occurred.

 

You probably guessed it, I’m talking about Coca-Cola here. Although the century between your "purchase" and today was particularly eventful, there would never have been a good time to sell your company.

 

How do you know if your company is a Nortel or a Coca-Cola? Just ask yourself, without checking the internet, what Nortel and Coca-Cola were selling in 2001. As Yogi Berra said “You can observe a lot just by looking! ".

 

The most useful tool for an investor is his stomach, not his head. Remember that while you may have feelings for the companies you own, the stocks you have don't know you own them. In the past, I have personally found that a nice glass of Coke Zero has always kept my head cool in such times.