The U.S. Market of Fear

If behavioral finance teaches us one thing, it is that Fear trumps Greed. In fact, it's not even close. Fear is like the Harlem Globetrotters playing the Washington Generals. Sure, ostensibly it's a real contest, but despite the ups and downs along the way, we always know who's going to win in the end. The outcome is predetermined, inexorable.

Fear drives the market. Why? Because losing hurts more than winning feels good. Because the future is uncertain, and the default emotion in cases of uncertainty is fear. Because you're not paranoid, the Market really is out to get you, and fear is the greatest weapon in the Market's arsenal.

How do we fight our fear? With "reason"? Well, some people do. And by "some people" I am chiefly referring to Vulcans - the supremely rational beings from the eponymous planet who are not afflicted by such human weaknesses as emotion. (Then again, Vulcans mate only once every seven years, so you can see why emotions could be a big drawback.)

No. For most of us on Planet Earth, we are forced to fight the battle on an emotional level. Reason definitely helps, but only so far as it helps us reacquire our emotional equilbrium.

Fear is a poison. But there is an antidote - Control. Not actual control (which is irrelevant) but the belief that that you have control. Fear beats Greed. Perception beats Reality - at least where our emotions are concerned.

We have seen this play out recently on marketwide level with the recent actions of the Fed Charmain, Ben Bernanke. The market flagged due to fear. (It always does due to fear.) But the fires of fear were stoked in large part because one of the main sources of investors' (sense of) control is the Federal Reserve Board.

After months of hearing "Inflation remains our primary concern", investors began to wonder if the esteemed Dr. Bernanke really "got it". The Market was saying; "Does he understand our concerns? Does he even care?"

Investors were riding shotgun with the Fed Chairman on a dangerous road. They were concerned there may be a cliff up ahead, but they were even more concerned that the Fed Chairman was asleep behind the wheel.

The first shot of control was injected back in July when Chairman Bernanke acknowledged that the mortgage crisis (and credit crunch) were on his radar screen. (Whew! He's not sleeping after all.) The second shot of control came when he lowered the discount rate. (He's awake and he's willing to hit the brakes.)

People called his decision to lower the discount rate a "largely symbolic move". Exactly. Symbols are important, especially when the symbolic gesture tells people, "Relax. I'm on it".

The Market has been calling (or is it whining?) for an interest rate cut. And I, for one, think that would be splendid. But investors got something even more important. They got back their sense of control.

It's like the immortal words of Mick Jagger:

"You can't always get what you want, but if you try sometimes, you might find you get what you need."

Fear: Preschool and School Age Children

Children (and most people) are afraid of things that they cannot understand or control, and strange or new situations or objects. They can be fearful of many things, because so much of the world is new to them. Fears may also be learned. Sometimes they come from a direct experience with something that hurt, eg. being bitten by a dog.

A fear can also be taught by parents, brothers and sisters, playmates, teachers, etc. For example, if the parent always gets afraid when she sees a spider or goes in a lift, the child is likely to be afraid of these things. Fears can also be caused by seeing or hearing about a danger, eg. on TV. Fear of being left alone at night or of the dark is still common among preschool children. Children also have vivid imaginations, and some of the things that they imagine they also believe are real, eg. monsters (especially children under three, who don't yet really know what is real and what is not real).

Young children need to be reassured if something is not real, but it may take them some time to really believe there is nothing to be afraid of. It is important that you don't act as if you believe the fears are real. There can be a fine line between pretending to look for monsters yourself, and showing your child that there are no monsters. Children of school age may be worried about burglars, afraid of having no friends, afraid of bullies, anxious about school work, or starting a new school or starting high school.

Older children often worry that their parents may separate, especially if they see this happening to friends' families, or if there are a lot of family arguments. Many children worry that a parent may die. Anxiety is infectious and can pass easily from one person to another. Worries and fears can pass easily from parent to child, and from child to parent.

In some ways, this passing of anxieties from parent to child can be helpful to keep the child safe, eg. the child learns that it is not safe to go on the road because you show that this is something dangerous. However, if you are too worried about too many things, the children are likely to be more anxious.

Fears: Young Children

Parents often worry about their children's fears and anxieties. Children's worries and reactions to situations vary enormously. Most children will be worried and fearful from time to time. You can help your children overcome fears and to have the confidence needed to be able to face up to the hard things that will happen in their lives.


What are anxieties, fears and phobias?
Fear is a feeling that triggers a number of changes in the body. When something happens that a person is afraid of, the body prepares to either tackle the situation or to run away. To do this, the heart rate and breathing rate get faster and the person may turn pale, perspire, have an unpleasant feeling in his stomach ('butterflies') or feel shaky.


While fear has a particular cause for example, a person, animal, situation that someone is afraid of, anxiety is a more general unpleasant feeling, where it may not be clear what the person is worried about. A phobia is a really strong fear of something specific. The fear is much stronger than the risk of harm and it interferes with things the person wants to do.

It is normal to feel worried about some situations, and being afraid is the way we can be prepared to meet and deal with danger- it makes us alert and ready to take action.

Young children will be naturally fearful of some things, such as being separated from a parent, and they need to be taught to be fearful of certain other things to keep safe. The dangers of traffic and electricity are too great, and young children cannot understand them, so fear helps them keep safe- parents also need to keep them safe and not rely on fear alone.

When deciding whether your child's fear is a problem, you need to consider:
Is it reasonable for a child to feel this way?
Is the fear interfering with the everyday life of the child or family?

If a child has a lot of fears and worries, it is important to think about what is happening in her life. For example, is there illness in the family, are her parents having lots of arguments, etc? Sometimes phobias begin at a time of trauma or difficulty.

Scientists Study the ABCs of Fear

There’s a trick to panic attacks,” said David Carbonell, a Chicago psychologist specializing in treating anxiety disorders. “You’re experiencing this powerful discomfort but you’re getting tricked into treating it like danger.”

According to the WASHINGTON (AP): Science is getting a grip on people's fears.

As Americans revel in all things scary on Halloween, scientists say they now know better what's going on inside our brains when a spook jumps out and scares us. Knowing how fear rules the brain should lead to treatments for a major medical problem: When irrational fears go haywire.

"We're making a lot of progress," said University of Michigan psychology professor Stephen Maren. "We're taking all of what we learned from the basic studies of animals and bringing that into the clinical practices that help people. Things are starting to come together in a very important way."

About 40 million Americans suffer from anxiety disorders, according to the National Institute of Mental Health. A Harvard Medical School study estimated the annual cost to the U.S. economy in 1999 at roughly $42 billion.

Fear is a basic primal emotion that is key to evolutionary survival. It's one we share with animals. Genetics plays a big role in the development of overwhelming -- and needless -- fear, psychologists say. But so do traumatic events.

"Fear is a funny thing," said Ted Abel, a fear researcher at the University of Pennsylvania. "One needs enough of it, but not too much of it."


Armi Rowe, a Connecticut freelance writer and mother, said she used to be "one of those rational types who are usually calm under pressure." She was someone who would downhill ski the treacherous black diamond trails of snowy mountains. Then one day, in the midst of coping with a couple of serious illnesses in her family, she felt fear closing in on her while driving alone. The crushing pain on her chest felt like a heart attack. She called 911.

"I was literally frozen with fear," she said. It was an anxiety attack. The first of many.

The first sign she would get would be sweaty palms and then a numbness in the pit of the stomach and queasiness. Eventually it escalated until she felt as if she was being attacked by a wild animal.

"There's a trick to panic attack," said David Carbonell, a Chicago psychologist specializing in treating anxiety disorders. "You're experiencing this powerful discomfort but you're getting tricked into treating it like danger."

These days, thanks to counseling, self-study, calming exercises and introspection, Rowe knows how to stop or at least minimize those attacks early on.
Scientists figure they can improve that fear-dampening process by learning how fear runs through the brain and body.
The fear hot spot is the amygdala, an almond-shaped part of the deep brain.

The amygdala isn't responsible for all of people's fear response, but it's like the burglar alarm that connects to everything else, said New York University psychology and neural science professor Elizabeth Phelps.

Emory University psychiatry and psychology professor Michael Davis found that a certain chemical reaction in the amygdala is crucial in the way mice and people learn to overcome fear. When that reaction is deactivated in mice, they never learn to counter their fears.

Scientists found D-cycloserine, a drug already used to fight hard-to-treat tuberculosis, strengthens that good chemical reaction in mice. Working in combination with therapy, it seems to do the same in people. It was first shown effective with people who have a fear of heights. It also worked in tests with other types of fear, and it's now being studied in survivors of the World Trade Center attacks and the Iraq war.

The work is promising, but Michigan's Maren cautions that therapy will still be needed: "You're not going to be able to take a pill and make these things go away."

When it comes to ruling the brain, fear often is king, scientists say.
"Fear is the most powerful emotion," said University of California Los Angeles psychology professor Michael Fanselow.

People recognize fear in other humans faster than other emotions, according to a new study being published next month. Research appearing in the journal Emotion involved volunteers who were bombarded with pictures of faces showing fear, happiness and no expression. They quickly recognized and reacted to the faces of fear- even when it was turned upside down.

"We think we have some built-in shortcuts of the brain that serve the role that helps us detect anything that could be threatening," said study author Vanderbilt University psychology professor David Zald.

Other studies have shown that just by being very afraid, other bodily functions change. One study found that very frightened people can withstand more pain than those not experiencing fear. Another found that experiencing fear or merely perceiving it in others improved people's attention and brain skills.

To help overcome overwhelming fear, psychologist Carbonell, author of the "Panic Attacks Workbook," has his patients distinguish between a real threat and merely a perceived one. They practice fear attacks and their response to them. He even has them fill out questionnaires in the middle of a fear attack, which changes their thinking and causes reduces their anxiety.

That's important because the normal response for dealing with a real threat is either flee or fight, Carbonell said. But if the threat is not real, the best way to deal with fear is just the opposite: "Wait it out and chill."

Want more info?

Check out this Harvard Med publication that pretty much sums up our lives, if your not consciously living.

Fear. . .or Fear Not