Mob Mentality Psychology: Turning Negativity into Opportunity

Mob Mentality Psychology

 Mob Mentality Psychology: Why Misery Loves Company

Updated May 13, 2023

We regularly update our articles, and the latest update for this article was made on May 13, 2023. You can find the update towards the end of this article.

Misery loves company, And stupidity adores it & Sum’s one of the main principles of Group Psychology. The media are masters at making things look worse and blowing things out of proportion. Gone are the days of telling the truth; today, it’s all about sensationalism and outright lies. As long as they can attract eyeballs, nothing is off-limits. This is sad as, once upon a time, the press did provide some value.

Today the news you receive from popular outlets is on par with toilet paper.  Look at these recent headlines; the hidden agenda behind these negative headlines is to trigger a stampede. Our responses to this yesterday, today and tomorrow were the same.  Group psychology states that the prudent course of action is to buy when the masses panic and sell when they are euphoric. 

Mob Mentality: Media’s Emotional Headlines

Look at some recent headlines used to Incite the Crowd; do not succumb to this rubbish. 

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Spin Doctors Trigger Crowds with Mob Mentality Psychology

Spins Doctors use the Principles of Group Psychology to trigger Stock Market Crashes

While the spin doctors scream of a day of reckoning, we think of a day without them. These spin doctors are parasites, sucking the energy out of healthy individuals with their dribble. The world will end one day; you will die one day, and blah-blah. Who cares about one day? You have today; actually, all you control is this moment. Focus on the moment and seize it instead of trying to plan for a time in the future you have no control over.  To understand the future, you must know what is happening now.  In one second, right now will become the past, and in the next second will become the present. Focussing on the present gives you a chance to shape history and the future.

Groundhogs Day every day?

To get a glimpse of the future, you only need to look at the masses.   What changed? The same con is still being pulled; crap is wrapped up and marketed as Gold.  The groups panic and head for the exits; they sell everything for next to nothing.  The outfits and players have changed, but the theme is the same. It is groundhogs day every day when it comes to the financial markets. Nothing has changed, and nothing will change for those who embrace the mass mindset. Moreover, remember that the media and doctors of doom use the word stock market crash to promote their agenda. The astute investor will refuse to fall for this rubbish and understands that these moments of panic allow one to buy Grade A stocks at a discounted price.

The Top Mob Mentality Psychology Ingredient to Stampede, the Crowd, is Volatility

On a separate note, volatility is indeed hitting every aspect of everyone’s life as we predicted last year; look at the elections. If this is not extreme volatility on display, we don’t know what is. Powerful V readings not only reflect what is going on in the markets but also cover what is going on out of the markets. Hence, you should continue to expect extreme weather patterns, erratic human behaviour (extreme surges in stupidity and violence) and a rise in extremism (violence in some areas, peace in others, etc.). If you embrace volatility, it will have almost no impact on you, for you will be able to view the situation with a set of clear eyes, resist, and you could be in for a helluva wild ride.

Mob Mentality in Financial Markets: May 2023 Update

The dot-com boom

The dot-com boom of the late 1990s is a classic illustration of the mob mentality that has pervaded the financial markets during the past 20 years. During this period, investors eagerly poured funds into internet-based companies without adequately examining their financials or business models. This behaviour resulted in a sharp rise in stock prices for many unprofitable companies with unsustainable operations.

 GameStop short squeeze

The hype intensified as more investors flocked to the market, fueling further speculation and investment. Eventually, the bubble burst, causing significant financial losses for many as stock prices plummeted.

 Cryptocurrency boom

Another instance of mob mentality in financial markets is the GameStop short squeeze in early 2021. A group of novice investors on the Reddit forum r/WallStreetBets collaborated to inflate the stock price of GameStop, a floundering brick-and-mortar video game retailer. Their goal was to compel hedge funds that had shorted the stock to repurchase it at higher prices.

 Housing market bubble

The frenzied buying and investing in GameStop caused a stock price surge. However, the bubble quickly burst, and numerous investors who had entered at elevated prices experienced substantial losses when the stock price fell. The GameStop short squeeze exemplifies how social media and online communities can magnify mob mentality and impact financial markets.

Certainly, another example of mob mentality in financial markets is the cryptocurrency boom, particularly the rapid rise and fall of Bitcoin in 2017. During this time, the price of Bitcoin skyrocketed from around $1,000 at the beginning of the year to nearly $20,000 by December. This surge was fueled by widespread media coverage, speculation, and a fear of missing out (FOMO) among investors who believed they could make quick profits.

 Conclusion

As more people invested in Bitcoin and other cryptocurrencies, the market became more erratic and unstable. Eventually, the bubble burst, and the price of Bitcoin plummeted, causing significant losses for many investors who had bought in at the peak.

Another example is the housing market bubble in the mid-2000s, which led to the global financial crisis of 2007-2008. During this period, low-interest rates and easy access to credit encouraged many people to buy homes they could not afford, driving up housing prices. Lenders and investors, caught up in the frenzy, overlooked the risks associated with subprime mortgages and continued to invest in mortgage-backed securities.

As housing prices continued to rise, the market became unsustainable, and the bubble eventually burst. The housing market’s collapse resulted in a wave of foreclosures, substantial losses for investors, and a worldwide economic catastrophe. This event is a stark reminder of how mob mentality can have far-reaching consequences in financial markets.

 

Utilizing Mob Mentality Psychology for Successful Market Investing

Don’t listen to the Doctors of Doom; negativity is a lovely buying opportunity in disguise. Wait for the crowd to react to the negative news and then jump in and buy quality stocks.  You should prepare a list of solid companies you want to own over the long run so that you are ready to act when opportunity knocks.  Some good companies are RTN, CHKP, NTAP, MSFT, NVDA, AMD, TSM, AXP, etc.

FAQ on Mob Mentality Psychology

Q: What is mob mentality?
A: Mob mentality refers to the phenomenon where people in a group adopt the same beliefs, attitudes, and behaviours as the rest of the group, often without questioning them.

Q: What is group psychology?
A: Group psychology refers to the study of how people behave in groups, including how they form, how they influence one another, and how they are affected by the group.

Q: What is sensationalism in the media?
A: Sensationalism in the media refers to exaggerating or sensationalizing news stories to attract attention and increase viewership.

Q: How can mob mentality affect financial markets?
A: Mob mentality can cause investors to follow the herd and make irrational decisions, leading to stock market bubbles and crashes.

Q: What is the dot-com boom?
A: The dot-com boom was a period in the late 1990s when investors eagerly poured funds into internet-based companies without adequately examining their financials or business models, resulting in a sharp rise in stock prices for many unprofitable companies with unsustainable operations.

Q: What is the GameStop short squeeze?
A: The GameStop short squeeze was an instance of mob mentality in financial markets where a group of novice investors on the Reddit forum r/WallStreetBets collaborated to inflate the stock price of GameStop, a floundering brick-and-mortar video game retailer, with the goal of compelling hedge funds that had shorted the stock to repurchase it at higher prices.

Q: What is the cryptocurrency boom?

A: The cryptocurrency boom refers to the rapid rise and fall of Bitcoin in 2017, which was fueled by widespread media coverage, speculation, and a fear of missing out (FOMO) among investors who believed they could make a quick profit.

Q: How can I avoid falling victim to mob mentality?
A: To avoid falling victim to mob mentality, it is important to conduct your own research, stay informed, and make rational decisions based on the facts and your own analysis. It is also important to resist the urge to follow the herd and to think independently.

 

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