KnovaMind is thrilled to announce that William "Billy" Hunt will be contributing a Weekly Editorial that all visitors can access for FREE. Billy has written a number of capsules that are available in the KnovaMind catalog, the interactive ones have proved most popular. He is well known as the editor of the KnovaWave Weekly Review and as lead moderator of the KnovaMind Advanced Trading Room. In addition to his market insight and trader mentoring he is known for his Global political and psychological insights. Like all KnovaMind Moderators he has never been shy to express his opinions, which are both stimulating and insightful. We trust you are in agreement and have provided a collection of his recent works below and in the Free Stuff area.

Each contributor has a number of free publications and articles for sale or periodicals available by subscription.

The Scream - Munch (1893)

With crowd mentality we tend to fear the same things together. It may be what we were scared of last week we may not bother with today. It is what the herd is scared of that we are usually scared of. In this series we are dealing with what our fears are monetarily, which in today?s Western society seems to account for the majority of people?s fears, sad but true. This series will deal with that, in the Crowd Behavior series we learnt how Crowd Behavior is developed manipulated and reacts to events. Here we are dealing more specifically with those fears the crowd has as a collective group. Recall these fears do change with the crowd!

The purpose of the KnovaWave Weekly Review is to put you in step with all the markets to give a heads up on what is affecting your particular trading instrument. Familiarize yourself with the different markets and the significant levels. Cognitive dissonance can be reduced by adding new cognitions, or by changing existing cognitions. Changing existing cognitions reduces dissonance if (a) the new content makes them less contradictory to others or (b) their importance is reduced. If new cognitions cannot be added or the existing ones changed, behaviors that have cognitive consequences favoring consonance will be recruited. Think About It! Is a series aimed at helping you understand why this is so.

Initially the Collective fears studied are as follows;

• High Interest Rates
• Having a job
• Paying taxes
• Buying a house
• Having credit
• Playing the Market
• Keeping up with the ?Joneses
• Personal Security

In the past few years, specifically since the Terrorist attacks on New York City on September 11, 2001 a new fear was added collectively to those residents of Western Countries that had not experienced terrorists attacks on their home soil. The purpose of this series is not to argue semantics of what entails a terrorist attack, I am well aware those events such as the Oklahoma City bombing or even the Branch Davidian compound can come under that umbrella in the United States case. What we are discussing here is when that fear became part of our collective psyche. Indeed in Australia?s case it can be argued that the event was when the attacks on Australian Citizens with the October 2002 Bali bombings killed 202 people and maimed so many more. Terrorism was not new to many other Western countries, Great Britain has experienced the IRA, France the Algerian militants, Spain the ETA, Italy the Red Brigade and Mafioso and in Germany there has been various Terrorist events over the years. These countries have been put on a heightened state of alert. Tony Blair told the Labour Party’s spring conference yesterday that the Spanish rail bombings showed the threat from terrorism was of a ’different nature’ to previous conflicts. As he offered the British people’s ’sympathy, condolences and prayers’, he said terrorism was the ’new menace of our time’. He added: ’My father’s generation were in the last conventional war to be fought on the soil of Europe to defeat the Nazis.’

Perhaps the most striking fact from the Madrid bombings of last week is that intelligence services have to maintain an open mind about who was responsible for the attacks indicating that any al-Qaeda link would have huge ramifications for the future of the war on terror. Confusion, as much as shock, can magnify terrorism’s destructive impact, underscoring why terrorists do what they do. This indeed would confirm a new dimension to Islamic terrorism on the security of Europe; previously it had been a one-dimensional threat with Algeria and Morocco with France. Al-Qaeda, or an organization affiliated or seeking to be affiliated with it, is the most likely culprit. A stolen van found near the originating point for three of the four-bombed trains contained detonators and an audiotape with Koranic verses in Arabic. To Bin Laden and his followers Spain represents part of the lost lands of the historic Muslim nation, which he vows to restore. By AD711 the Iberian Peninsula had been mostly conquered by Muslim armies. The last Islamic ruler was eliminated from Catholic Spain in 1492. There is a devotion to the cause that these terrorists portray that goes beyond our MTV minute rationale. In a letter emailed to the Arabic newspaper Al-Quds al-Arabi in London, the Abu Hafs al-Masri Brigades, an obscure group claiming to be part of the al-Qaeda terrorist network, has claimed responsibility.

The possibility of an al-Qaeda link was raised when a Spanish radio station reported that intelligence sources were ’99 per cent certain’ Islamic terrorists were involved, as police confirmed they were looking for three men with ski masks and bags seen on the day of the attacks. They later arrested five men in connection with the bombings. However, Spanish authorities maintained that the Basque terrorist organization ETA remained the prime suspect and forensic investigators confirmed that there was no evidence of suicide bombers. Spanish Prime Minister Jos? Maria Aznar was last night embroiled in controversy on the eve of the country’s general election over why he and his government categorically blame ETA. With national elections this Saturday and the Spanish Prime Minister, Jose Maria Aznar, is proud of his success in weakening ETA. It was politically convenient to suggest ETA, desperate and dangerous, need to be terminated. Too hastily, Spain persuaded the UN Security Council to condemn ETA. It soon backed off and accepted that responsibility for this atrocity, in which almost 200 have been killed and more than 1400 injured, could lie elsewhere.

With this new wave of shocking cold-blooded attacks on the innocent we have had an added dimension of where and why, we now have which group? Even more striking is that the officials, the experts and even the terrorist groups themselves are not sure who ? this is the alarming aspect are terrorist groups springing up as the new political wave against the west as the only means of being heard? This appears to be the trend as we become more and more immune to the horror and tragedy of it all ? to many each event is no more than another event of reality television. In time this will change no doubt as it is not a question any more of Xenophobic arguments of who was responsible for such heinous acts on innocent people but a realization that it is now a part of our lives and can happen to us. Certainly it is an affront to civilization, as we know it and is a fear to that in its totality can collectively numb a crowd to fright or to thoughts of hopelessness. This is a collective fear that is difficult to grasp as it is so far reaching and belittles the other fears in this series as it questions the validity and purpose of so many of our daily market mechanisms.

The fears are perhaps so deep and resounding when thought about. One is reasonably concerned when he or she has to ask how does this happen in a country, used to terrorism with the ETA? How does this happen in a country already on alert to revenge attack because of its involvement and support of the coalition in Iraq? Even more poignant this all happened a few days before a national election. In a taped message released last October through the Arab satellite channel al-Jazeera, and widely considered authentic, Osama bin Laden chillingly announced; "We reserve the right to retaliate at the appropriate time and place against all countries involved, especially the UK, Spain, Australia, Poland, Japan and Italy." Thus he warned that Spain would be among six nations targeted for their role in the Iraq war. Last year a Spanish chief magistrate issued a 700-page indictment against bin Laden and 34 others, including Muslim extremists living in Spain. Given this and their penchant for mass murders to produce high body counts and attacks on planes would not mass transit be a likely target?

These are all the questions that come to the forefront of why? First, we fail to address why do the terrorist resort to such means of destruction. This is the key, we talk of crowds that invest, don?t invest, that trade, don?t trade etc. These are not questions that crowds of the majority of the world ponder; materialism is not the issue that comes up, it is survival. Hence this is a collective fear of the unknown in almost every sense and perhaps enables the other fears in this series to be meaningless and in some kind of reverse psychology enables to have them come to the fore as a type of blanking mechanism. (All for another discussion!)

The latest attack certainly brings into question so many of our cherished pastimes and events that are part of our lifestyle and global interaction. There are the elections of course but think for a moment of a major event such as the Olympics, the world’s greatest sporting event that opens in Athens exactly five months from now. The attacks in Madrid have sent security experts scrambling to revise safety plans for the event. Visiting IOC president, Jacques Rogge, was visibly agitated with Kostas Karamanlis, the newly elected Greek Prime Minister. as fears mount over the impact of construction delays on the safety of the games.

With all this comes a very chilling reminder, not only is this threat new and scary but how can we cope with it and more importantly how do we? This consequence of these attacks is horrendous to think of. We have studied much of the mindset changes of markets, of what is of value, of what is right and what is wrong. Most Western countries, as proven by past events could struggle to cope with an incident on the scale of the Madrid attacks. Let us look at Britain which has experience with the IRA conflicts; hence like Spain they are experienced in the defense of terror. Alex Robertson, chairman of the British Transport Police Federation, will reveal this week that increases in the BTP budget for 2004-05 will be more than used up by higher pension and VAT bills, forcing it to cut 50 officers from the 2,200-strong force.

’After the tragic events of last week, I don’t know if we could cope to that level. Over the years, the BTP have dealt with numerous cases of terrorism, we’re quite experienced at it, but as soon as you start cutting numbers you start losing that expertise.’
Chief Constable Ian Johnston.

Chief Constable Ian Johnston said he was lobbying Ministers for more funds to increase both uniformed and plain-clothes patrols and protect the vulnerable national rail and London Underground systems after several years of real budget cuts - despite other forces receiving increased grants to cope with the higher terrorism threat.

’’You talk about 2,200 officers, but there are nearly 3,000 stations in the UK... so you get pretty thin quite quickly,’ he said. ’On a day-to-day basis we have the job in hand, it’s just when the pressure is on that it’s difficult to respond.’ Chief Constable Ian Johnston again.

This is the scary thing despite the entire hullabaloo it is clear that all things economic take precedent in the west ? indeed the response in the US was more geared towards the Stock Market?s reaction to the attacks than anything else. In the UK it has been reported senior emergency planning officers have formally warned Ministers on at least 12 occasions since 11 September 2001, that local authorities are not equipped to deal with a major terror incident. The Emergency Planning Society, which represents 500 government planners, the 999 services and health experts in England and Wales, said civil defense plans for dealing with a terrorist attack are at least 15 years out of date. This is in a nation which was also rocked by the November 2003 car bomb attacks on the British embassy in Istanbul.

There is a new dimension to this fear and that is the one of mind games. Is it not already to come to grips with it being apart of our life? How far reaching is this terrorism threat? Whether Abu Hafs al-Masri Brigades speaks for al-Qaeda or is representative of another threat is another thing. Recall that they took responsibility for the massive blackout last year in the northeast United States and parts of Canada. Officially it was announced to the world to have been caused by a power grid problem. The group has also claimed responsibility for the bombing of the UN headquarters in Baghdad, and attacks on synagogues in Istanbul, Turkey. Yet we plod along oblivious to many of these threats and what it can do to out way of life and to many our raison d?etre This is in line with where we are in the markets at present and underscores the collective nature of the fear and the individual apathy in US markets that presides. It has become practice to view how the crowd reacts, gauge that reaction and use that as an excuse rather than a response.

People are predictable in an unpredictable way!

Think About It!

Until next time?Billy

References.

Sornette, Didier (2002) Why Stock Markets Crash: Critical Events in Complex Financial Systems
Le Bon, Gustave (1878) The Crowd - A Study of the Popular Mind
Bloomberg, Investor?s business Daily, Reuters, Sydney Morning Herald, Le Monde

Also make sure you register with TradersCommunity.com it is a great reference point and educational source. I couldn?t recommend it enough! All the major markets are represented - Forex, Commodities, Equities, Futures and Fixed Interest. Technical Analysis and Psychology are also features of the site.

There is also plenty of fun stuff. Myself and all the other KnovaMind contributors have all undertaken to contribute?including Sam , Trader OZ and Roddy Radar our latest members to the KnovaWave team.

Just go to www.traderscommunity.com or click on the icon and register.

• March 12, 2004 Collective Fears - Part Four: Personal Security - Global Security
• March 5, 2004 Collective Fears - Part Three: Having a job: Postponing Reality
• February 20, 2004 Collective Fears - Part Two: Buying a House: Low mortgage rates
• February 20, 2004 Collective Fears - Part One: High Interest Rates - Inflation an issue?
• February 6, 2004 Crowd Behavior in Markets - Part Twenty One: StoryLand.
• January 30, 2004 Crowd Behavior in Markets - Part Twenty: Fed Conditioning.
• January 23, 2004 Crowd Behavior in Markets - Part Nineteen: Tempering Herds.
• January 16, 2004 Crowd Behavior in Markets - Part Eighteen - Wave 2? a pictorial of belief.
• January 9, 2004 Crowd Behavior in Markets - Part Seventeen - Belief becomes fervor
• January 2, 2004 Crowd Behavior in Markets - Part Sixteen - Belief and Obedience
• November 28, 2003 Crowd Behavior in Markets - Part Fifteen - Bifurcation
• November 14, 2003 Crowd Behavior in Markets - Part Fourteen - VIX and Waves
• November 7, 2003 Crowd Behavior in Markets - Part Thirteen - Measuring Fear and Greed
• October 24, 2003 Crowd Behavior in Markets - Part Twelve - The Collective Mind
• October 17, 2003 Crowd Behavior in Markets - Part Eleven - Conscious Personality
• September 26, 2003 Crowd Behavior in Markets - Part Ten - Obedience
• September 19, 2003 Crowd Behavior in Markets - Part Nine - Mindless Immunity
• September 12, 2003 Crowd Behavior in Markets- Part Eight - Pavlov’s dogs
• September 5, 2003 Crowd Behavior in Markets - Part Seven
• August 29, 2003 Crowd Behavior in Markets - Part Six
• August 8, 2003 Crowd Behavior in Markets - Part Five
• August 1, 2003 Crowd Behavior in Markets - Part Four
• July 25, 2003 Crowd Behavior in Markets - Part Three
• July 18, 2003 Crowd Behavior in Markets - Part Two
• July 11, 2003 Crowd Behavior in Markets - Part One
• July 5, 2003 Crowd Behavior in Markets - Cognitive Dissonance Theory
• June 27, 2003 Like Wow Wipeout!
• June 20, 2003 Don’t ask the Fed for help
• June 13, 2003 When the Levee Breaks
• June 8, 2003 Spinning for a black hole
• May 2, 2003 Wave three out the back
• April 17, 2003 What has Easter Bunny got?
• April 11, 2003 Saddam toppled, what next?
• April 4, 2003 How long before the fire singes?
• March 28, 2003 Shock & Awe - wrong channel folks!
• March, 14, 2003 The most important truths...
• March 7, 2003 Caught in my Shadow
• February 28, 2003 The enemy within
• February 22, 2003 Here we are under a Bood Red Sky
• February 15 2003 What do we see through the smoke & mirrors?
• January 31, 2003 The Party?s over -
• January 24, 2003 Mum what is going on?

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