Wednesday, October 01, 2008

The Intolerance of Crowds

A sure sign that a stock market crowd has formed, either on the bullish or, as now, on the bearish side of the market is the intolerance its members show towards people who disagree with them. This shows very clearly in the comments section of this blog. The bears, who have been "right" so far  offer nothing but ridicule and contempt to those who are on the other side of this market.

A crowd is distinguished by the inability and unwillingness of its members to think independently of their fellows. Instead each member of the crowd accepts the same set of "facts" which become slogans to be repeated whenever a dissenting view threatens their comfortable interpretation of events.
This is a problem because it means that the only thing that will shake the crowd's confidence in their facts and their apparent implications is a very big, very unexpected market move in the opposite direction. At that juncture the crowd disintegrates, its members retiring from the field to lick their wounds. When the smoke has cleared very few of them will have any positive investment results to show for their efforts. About all they have gained is the fun of being part of a big, like-thinking group of investors. This is what happened to the big, bullish, bubble crowd in the stock market in 1999-2000. The same fate awaits the big, bearish, the-end-is-nigh crowd in the market now. 

7 comments:

Anonymous said...

Might I say.... Zing! Way to go Carl!

Anonymous said...

You are being unfair to the people like myself who criticized you. Obviously if we are 'mooching' of you as we do? we respect your market calls.. However earlier this week you became political, and emotional.

You can bask in the fact that your bullish call was partially correct but dont show disrespect for people who made comments that were perfectly warranted. Come on, your more professional then this.. Move on already.

Duncan B said...

Carl, I couldn't agree more!!

glmonahan said...

Carl,
While I haven't always agreed with your longer term outlook, I have enjoyed using your intra day turning points to advantage.

I concur with your distain for some of your disrespectful critics.

Keep on keepin, on...

Thank you,
George

P.S. I do think we have made an intermediate term bottom.

Anonymous said...

I think your article might make sense if you talked about a mob and not a crowd.

A crowd is generally a group of people gathered together, not neccesarily having a direction in what they intend or want to do.

A mob, is usually pictured as having made up their mind.
(pitchforks and torches)

I understand what you're saying, but a crowd is a group of people full of inderection and differing views. A mob or mod mentality generally if not very tolerant of multiple choices of what to do.

Anonymous said...

Calling you "names" is not approprate just because we have differences in opinions.

However, in reading your blogs in the last few months, many of your calls were found to be incorrect. Time after time, we see you making the same mistakes & then correcting yourself.

The issue becomes a credibility one or incompetency whichever way you look at it. It is hard, no one has been perfect in these markets.

Obviously no one is obligated to read your blogs. But just some thoughts as to why you are getting negative feedback.

Sam said...

Carl,

Great post. I think you're right on that the short side of the trade is getting way too crowded and that we are due for a bounce. How long/high? Who knows, but a bounce is coming and it will be fueled by the crowd that is scrambling to get out.

In any event, people focus too much on being "right" when they should be focusing on the different ways in which they are likely "wrong."

Thanks for all your great work!

Best regards,

Sam