(That’s why it’s essential to remember that ‘being too far ahead of your time is indistinguishable from being wrong.’ Things combine to make it difficult including natural herd tendencies and the pain imposed by being out of step, since momentum invariably makes pro-cyclical actions look correct for a while. “Resisting – and thereby achieving success as a contrarian – isn’t easy. However, in the financial markets, the “herding” behavior is what drives market excesses during advances and declines. In life, “conforming” to the norm is socially accepted and in many ways expected. The thought process is rooted in the belief that if “everyone else” is doing something, then if I want to be accepted, I need to do it too. Though we are often unconscious of the action, humans tend to “go with the crowd.” Much of this behavior relates back to “confirmation” of our decisions but also the need for acceptance. It isn’t the surge into equity ETF’s which should give rise to concern about future outcomes, but the components of “psychology” behind it. Today, the rush to buy “ETF’s” has clearly taken that mantle, as I discussed last week, and as shown in the chart below.” Rather it was railroads, real estate, emerging markets, technology stocks or tulip bulbs, the end result was always the same as the rush to get into those markets also led to the rush to get out. “At each major market peak throughout history, there has always been something that became “the” subject of speculative investment.
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