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| Gray Wolf - mlorenzphotography |
Markets really are about the madness and behaviour of crowds. It’s very different to what I was taught back in the early 1980s when economics whittered on about “rational expectations”. I’ve learnt there is nothing particularly rational about the way market participants tend to think.
During the Second World War a study of soldiers figured only about 3% of frontline troops actually fought to kill. The rest were followers. So it is in finance. The bulk of market participants go with the flow. They don’t ask the difficult questions and they don’t call out obvious inconsistencies. These sheep inevitably get rounded up and fleeced by the tiny number of wolves. It works because market participants are attracted to well marketed big ideas, but run with them without really appreciating the consequences of the hype they’ve bought into. - Blaine's Morning Porridge
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