Wednesday, February 19, 2014

Investors Follow a Herd Mentality

I was not that good in the markets early on because I was so logic based. You do your analysis and you determine what the true value of something is. be it a stock or a company I should say, and it’s partly true. I mean that’s part of analysis.

But, what’s greater is to learn the psychology. People really don’t like to be lone wolves. There aren’t a lot of us that are. There aren’t that many mavericks in the population.

So, people to be truly independent thinkers and really not care what others think of them and go out is unusual. Most people are, again, herd mentality. So, if John, Joe, my brother in law, and sister are doing it then I can join in and do it. In other words, it’s like a herd or pack mentality.

That’s why you get these moves as everyone’s jumping in. Because when the guy at the water cooler says yeah I just bought my gold, my broker this and that, yeah I got a good discount, and on and on. They’re babbling and babbling. So be it. I’m free market. Do what you want to do.

But, that kind of catches fire. John bought gold. John’s a smart guy. He’s driving this car. Hey, I’m going to buy gold, too. It kind of accelerates. Those things take acceleration phases. That’s what I call them.

Like right now, you haven’t asked me, but tell everybody for the record, we’re in a distribution phase of the general stock market. Not that it won’t go higher. It probably will. But, the professionals are distributing what they picked up much earlier when no one wanted it, their stocks. They’re distributing them to the retail investor, the unwary public. Because the public is being told by the mainstream media and others that the stock market’s the place to be, because all this funny money primarily has gone into that arena.

But, the pros are selling their stuff. Like I said earlier, selling the strength. Strength is still in the stock market. You’ve got to have somebody to sell it to. You want the market to continue to go up, so you distribute into somebody that’s willing to buy at these high prices. Letting it go somewhat higher, and then when the bottom falls out, caves in, you aren’t holding the bag. The public is.

- Source, David Morgan via Sprott Money: