The herd mentality is in full gear. It is feeding off of itself. The constant chatter about gloom and doom leads to spending cuts by companies and consumers. It becomes self fulfilling. As we keep talking about how bad it is going to get, the likelihood of economic disaster increases.
So does that mean we should stop talking about it? Should we resist the temptation to act as everyone else and forgo cost cutting and hunker-down tactics? Should we go on the offensive instead of the defensive? Isn’t it the contrarians who make the money when the herd is trampling?
A while back, I wrote a post titled The Problems with Contrarian Investing. Now is an awful good time to read this post. I will reprint a couple quotes from the post:
The overwhelming percentage of contrarian ideas are not just wrong, they’re downright horrible.
Your ideas have to be right, even if they sound wrong. You have to raise money, even though most money sources think the idea is flawed. You have to trust your convictions, even as others chip away at your confidence.
I ended the post with “Do you still want to be a contrarian investor?” My answer for most people is “don’t go there“. My answer for me–”hell yes!!!“. I just hope I dont get trampled by the herd.
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