Contrary Opinion is a sophisticated analytical technique used by astute speculators to take advantage of important turning points in the market.
It has been historically well observed that the prevailing sentiment of the vast majority of market participants at major market junctures has been absolutely, utterly, inexorably, and completely wrong.
The "public" has duly demonstrated, time and time again, its uncanny ability to be wrong at precisely that point in history when it was most important to be right.
Students of crowd psychology have characterized such behavior as "phenomena" or "manias".
Thus, the unmistakable Contrary Opinion lesson to be learned: A veritable fortune awaits those able to separate themselves from the "crowd" at such moments.
Simple? Yes. Easy? No. Au contraire (pardon the shameless pun).
Becoming a "contrarian" requires a degree of mental discipline such that one might almost seem to be not-of-the-human race. Someone sort of like the character Spock, of Star Trek fame, immediately comes to mind.
Trust me when I tell you that, given the choice, most humans much prefer the company of other humans to being alone, especially in times of great stress or anxiety. And, of course, there's never any stress or anxiety present in the stock market, right?
This could explain the popularity of stock market internet chat rooms. Misery loves company. Hence, the term, herd mentality.
Especially, when things are going well in the market, no one wants to hear that the party's over. They'd rather shoot the messenger and "party on, dude!"
After all, the public only likes to play the market from the long side. They're the good guys. They never go short. Short sellers are the bad guys. To them, selling short sounds wrong and un-American.
Imagine, trying to benefit from the markets decline! Making money when everyone else is losing. Shameful. Disgusting. See their mind set?
Every speculator that knows to get in when others want out and get out when others want in is expert at Contrary Opinion. How else can they be successful?
All that is required is to be able to determine what the prevailing sentiment is and go against it. Sounds easy, but it's not quite that simple. You see, the public is not always wrong. They're only wrong when it's most important to be right. At major junctures.
The public likes to buy on dips and sell on rallies. This works. Until it doesn't.
My favorite definition of a long term investment: A short term speculation that didn't work out.
The public exhibits the least amount of fear at major market tops and the most fear at major market bottoms.
Thus, the more exuberant they become the closer the market must be to the top. Conversely, the more frightened, the closer to the bottom.
Being expert at contrary opinion is synonymous with being expert at crowd psychology and the stock market can't value that highly enough.
What are your thoughts on this subject? Share them!
Two Paths to Financial Independence
1. Own your own successful business.
2. Own a piece of someone else's successful business.
... Billionaire J. Paul Getty, founder of Getty Oil.
Every business needs to advertise...
“I’d rather have 1 percent of 100 people’s efforts, than 100% of my own.” ... J. Paul Getty, founder of Getty Oil.