We thought that the best way to illustrate how the masses operate would be to put up something that would be entertaining and educating at the same time. Our answer to this was to create a Comic Strip Illustrating The Mass Mindset, in action. If you want a more detailed analysis of this phenomenon, then take a look at this article A clear illustration of the mass mindset in action.
In the first part (look at the cartoon below), the naysayers are screaming death to the markets and the second are the enlightened ones celebrating and salivating as the market tumbles. In a nutshell, these compasses the most fundamental principle of Crowd Psychology. One must wait for the emotions to hit a boiling point and in that sense, it differs a lot from the so-called fashion contrarian style of investing. Fashion contrarians embrace a new trend because it looks great or sounds cool or they want to appear to be contrarians without even knowing the actual meaning of the word. Fashion contrarians are nothing but lemmings with heavy camouflage gear.
Crowd Psychology and the Coronavirus PandemicTo put things into perspective, consider this: If cancer were a virus, it would be one of the most lethal viruses of all time, yet no one blinks that we lose 9.6 million people a year to this insidious disease. Until mass-scale testing is underway and the data is broken down into categories such as age group and other pre-existing conditions, all the massive death projections experts are issuing amount to faulty science.
It appears that the only course of action on the table is to give in to panic and flee for the heels. Well, that’s true if you are part of the herd; such action brings short term relief at the expense of monumentally large gains for the long-term player. Nobody knows the inner workings of a company better than the insiders and these chaps are doing something that can only be described as unprecedented, further confirming that this sell-off represents opportunity instead of a disaster.