Lemmings & Herd Mentality equate to stock market losses

The leaders represent less than 2% of the population yet take in more than 90% of the profits. Getting to this stage is not easy as it involves changing one’s ingrained modes of behaviour. Sol Palha

Lemmings & Herd Mentality

Lemmings & Herd Mentality Equates To Financial Loss

If one wants to win in the markets, one needs to the opposite of what feels compelled to do. In other words, stop acting like a lemming and start thinking out of the box.  Mass psychology is one of the most effective studies/tools one can use to gain an edge over other market participants.  It is very simple to comprehend if one is willing to open one’s mind to new ideas. Perhaps its simplicity is what makes it difficult.

Experts, economists and the general masses tend to confuse the concept of being patient with hard work and that is a monumental error when it comes to the market. Hard work does not pay when it comes to investing but patience pays very handsomely.

Two of the most important traits to master in the markets are patience and discipline, hard work ranks right at the bottom. If you plan on being a manual labourer hard will pay but if you want to become a successful investor hard pays very poorly.  Your first move, therefore, should be to stop following the herd (stop thinking like a lemming) and take a position that is in opposition to that of the crowd.

Without Good Health, Wealth means nothing

While attaining wealth is important, if one does not have good health, then all the wealth in the world is irrelevant. Good health is priceless and this is why we advocate that investing should be fun and the way to make it fun is to master the principles of patience and self-discipline.   A patient person can wait for the investment to come to them instead of chasing a stock and in the process, one ends up buying ti closer to the top than the bottom.

A patient person has plenty of time to enjoy life and do the things they find interesting while waiting for the next opportunity.  However, remember that lemmings are destined to lose, so focus on your health but never adopt the lemmings mindset which states that there is safety in numbers. In the markets, there is no safety in numbers; you are safe only if you take a counter stance to that of the crowd.

Mass Psychology and Lemmings

In today’s world, the average investor can pull up data only multimillion-dollar firms had access to 10-15 years ago. However as this data is available to everyone at the click of a mouse, it no longer provides the investor with an edge. In fact, this data today is useless as every Tom, Dick and Harry has access to it and the only data that is valuable is data that is hard to access, nobody wants to look at or hard to understand.

Welcome to the wonderful world of mass psychology and the interesting part is that it works as well as it did 100’s of years ago.  In essence mass, psychology states that one should sell only when the masses are euphoric and one should buy only when the crowd is in a total state of disarray or stampeding.

Michael Montaigne Understood The Lemmings Mindset Very Well 

Let’s examine several excerpts from this great man’s book. He was several 100 years ahead of his time.

In the study of history we must thumb without distinction every sort of author, old or new, French or foreign, in order to get at their great variety of matter, But Caesar, in my opinion, deserves particular study, not only for his knowledge and manner but for himself. Aside from the false colours with which he seeks to paint over his bad cause and the filth of his pestilent ambition, the only fault I can find with him is that he spoke too little of Caesar.  

The Second excerpt

In reading history, I am accustomed to considering who and what the author may be. If he is a professional writer, I expect to learn from him mostly style and language. If he is a lawyer we should note what he offers on civil government, legal controversies and the life; if an ambassador, what he says on the sources of information and the conduct of negotiations. We should always bring the cobbler to his last.  

I like historians who are either very simply or very capable. The simple ones make it their business to merely collect what comes to their hand and record it faithfully, without discrimination or contributing anything of their own mind; they leave us to our own judgement in getting at the truth. Such for example is honest Froissart, who is frank enough, when he is caught in error, to correct it on the spot and who gives us the varied accounts made to him of the same event and even the rumour current in his time. His is the naked raw material of history, which everyone may profit by as far as he is able. 

Excerpt Number three

The really capable and excellent historians possess the judgement to sift the reports that come to them and choose those most likely to be true. From the mind and character of a prince, they deduce this intention and put the proper words in his mouth. But certainly this privilege belongs to a very few  

As for the others, who fall between the two (and they are the majority), they spoil everything. They want to chew our meat for us. They assume the right to judge history and accordingly distort it to their own bias. They undertake to select what is worthy to be known and often hide from us the very word and gesture which would teach us the most.  They omit as incredible as anything they can’t understand and many things, perhaps because they don’t know how to express them in good Latin or French. 

For the most part, but especially today, your historian or biographer is elected for work because he knows how to handle language as if we were to learn grammar from them. They are hired to weave the reports they pick up on the streets into a pleasant jingle of words and sell us so much babble.  But good histories are those written by men who either commanded or participated in the events they describe or at least have had similar experiences. Even so, the research for truth is delicate. Asinius Pollio found mistakes in the histories of Caesar himself, either because he could not have his eyes everywhere or credited the false account of his lieutenants.

The Fourth Excerpt

As a matter of fact, the knowledge we have of our own affairs is obscure enough. To aid my weak memory, I have adopted a custom of late to note at the end of very book I read (and do not intend to read again) the date when I finished it and what in general I thought of it. And yet it had befallen my time and again to open a book as new and untasted which I had carefully read a few years before and scribbled up with my notes.

The name of this author and a great book are as follows:

Michel de Montaigne and the title of his book his Michel de Montaigne- “The Complete Essays of Montaigne” and the best part is that you can read it for free.

Other Articles of Interest:

Currency wars & Negative rates will destroy fixed-income individuals (Feb 25)

Financial Markets Gripped by Panic & masses stampeding  (Feb 23)

Interest rate wars-Fed stuck between a hard place and a grenade  (Feb 23)

Mob Psychology: Market Crash of 2016 buying opportunity (Feb 21)

People’s QE: Central bankers forcing the public to speculate (Feb 18)

Currency wars explode: Negative interest rate wars start (Feb 15)

Medvedev states Merkel’s immigrant policy quite simply stupid (Feb 12)