When extreme fear sets in, there is likely to be irrational behavior. In that situation, the stock market resembles a theater that is filled to capacity. Someone sees some smoke and yells “Fire, Fire!” There is a mad rush for the exits. In the theater called the stock market, you can only exit if someone else buys your seat—each share has to be held by someone! If there is a mass rush to leave the burning theater, what price do you think these seats would go for? The trick is to only buy seats in those theaters where there is a mass exodus and you know that there is no real fire, or it’s
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