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Dr. Krystal presents an interesting and thought-provoking thesis. His statement that psychological factors play an important role in the swings of the stock market is, of course, true, as any broker empirically knows. He states that the problem has never been seriously investigated by psychoanalysts, and here, too, I agree with him. I disagree with him as to the importance he gives to the cyclic aspect, i.e., that guilt over accumulation and excesses produces an economic recession. Selling stocks at a profit is not necessarily a guilt reaction, yet it is overselling that produces a market decline. Excessive profit-taking begins the change in market direction, and then the small investor, who cannot financially or psychologically stand too great a loss, joins in and the Bull becomes a Bear.
Krystal's concept of greed and oral optimism deserves serious consideration. I believe these are the essential forces operating with the unsophisticated investor and that they largely determine his attitudes and behavior. Lord Rothschild, when questioned as to his formula for success in the stock market, responded, “I sell too soon.” The small investor buys too late and is unwilling to accept a small profit. He hopes to double or triple his money. He seldom buys when the market is low—only when the market is strong and he hears of great profits being made; then he greedily plunges in, hoping to achieve similar gains. Fate, the silent handmaiden of the parental image, beckons and says, “You can get your share and maybe even more.” Unfortunately, this is usually too late and at a time when the market has almost peaked. The large investors, i.e., institutions and mutual funds, are already shifting their portfolios into high yield bonds because of the high price/earning ratio and low dividend yields. Then, as the market turns, the small investor clings optimistically to the hope that this is only a temporary setback. Finally he loses hope—Fate has denied him again. It is with this reje