The Sheeple Syndrome

sheepleOne sheep to another, “Well whadda ya know! I’m a follower too!” Come on, admit it, we’ve all watched this behavior and snickered. Lemmings all!! The author, Gary Larson, used the cartoon (shown) published in calendars and his work wreaked of sarcasm. The genius of Larson’s illustrations was that he observed human behavior and then illustrated it. Some were amused, others were offended because it hit a nerve, (like looking in the mirror) but no one could dispute his ability to define human nature.

And my point is? When reading articles over the last week, some focused on the anniversary of the bull market, while others took the trip down memory lane to the recession & market decline. The third category is what prompted the reference to sheep. Those articles looked at how the investor is doing since the end of the market decline.

These are my favorite because they are so predictable and WRONG!! With the 5 year anniversary of the Bull we always get the same tired observation, which is, retail investors are always the last ones to the party and indicative of a top. First, it should be pointed out that retail is right there with pension funds managers and others who are managing huge sums of money.

But frankly it’s nothing more than human nature, overtaken by the emotion known as FEAR!! Most investors took a beating in the market decline of 2008 and that experience is not easily forgotten. But other factors come into play when investor results are tallied.

Yes, the “sheeple” syndrome is relevant because people, (investors), find comfort in following the crowd. Remember the article on Shiller who was embarrassed to express a contrary argument in his “field of expertise” because the “crowd” was going in the other direction? Whether the timing or direction is right, as long as everyone else is on board then it’s OK. Right? More on that shortly!

What drives investors to behave as they do? Fear? Greed? Anxiety? Bad advice? Experts? The list is long and always about the same. The words might be different but the underlying problem remains the same from market tops to bottoms. Investors react (emotions), act on predictions (which we all know is absurd), guesswork (equally foolish), TV talking heads, printed material, etc. None of the sources are consistent which makes it difficult for those trying to prepare for their future.

I have to deviate briefly to share an item I read recently. A new twist on the “prediction” nonsense: The twist is to analyze social media rants, (positive or negative) and then predict how investors are going to respond. Just when you think you’ve heard it all! It’s no wonder investors sit on their hands rather than risk getting beat up AGAIN!!

Who can blame investors for following crowd behavior when there is so much bad advice and downright ridiculous statements made about markets, investing, and human behavior? In the absence of a program that provides the missing ingredient to successful investing, a prudent individual should be skeptical.

Clearly there is a lot more to be said about the various issues I have raised today. Future articles will dissect each point to provide clarity, and demystify all the discussions that are intentionally aimed at just over your head. If you expect to succeed in making money in the markets, there are some basics to learn and follow.

  1. Don’t try to outsmart the market — as Jesse Livermore said, “Markets are never wrong. Opinions are!”
  2. Advisors, managers, talking heads, “experts” can NOT predict the future! The best they can do is “guess”. Do you really want to risk your money on guesswork?
  3. Don’t “buy and hold” — also known as “hold and hope” —
  4. When in doubt — DON’T! Where there’s doubt, there is anxiety! Anxiety leads to emotional decisions!

Subsequent articles will address all of the above and more. If there are items you want addressed, log on to and use the contact form. I want to hear from you; provide answers & improve your results.

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