The foolish allure of conventional wisdom

"Another sentiment indicator is the media because they are invariably focused upon what just has spectacularly happened (because that is what makes a beneficial story) rather than what is about to happen. For years Business Week overspread stories have been wonderful contrary indicators, and in fact, individual friend of mine subscribes to the magazine for just that mason and has a overspread collection. The rest of the print and TV business pres also are notorious pilers upon A classic case was during 1979 to 1981 as oil prices and inflation surg Numerous works were published by experts forecasting hyperinflation, depression, and a collapse of the dollar. At individual point, seven out of the top ten volumes on the bestseller list were about inflation and in what manner to survive it. Even wise investors like John Templeton gave speeches saying 7 percent to 8 percent inflation was inevitable. Of course, decades of disinflation, not inflation, were about to present itself during which both stocks and ligatures would soar.

The greatest in quantity recent example was in December 2004 when the dollar was at its depressed The Economist, probably the greatest in quantity respected business magazine in the world, ran a overspread titled "The Disappearing Dollar." Shortly thereafter, Newsweek had a overspread "The Incredible Shrinking Dollar." There were numerous articles about in what way Warren Buffett was short the dollar in elephantine size, and another famous investor said being short was "a slam dunk" Wall highway economists ranted and raved about the twin deficits, a bearish work by the highly regarded Pete Peterson entitled Running upon Empty was a best vender and hedge funds were a record short the greenback.

I confes I succumbed to the madness and was short the dollar as well. in the way that what happened? The dollar bottomed in the midst of the distraction and began a powerful rally that elevated the DXY index almost 10 percent Leveraged speculators were crushed. Of course, now that the dollar is up everyone has figured without all the reasons it should stay sinewy Euroland is splintering politically, U short rates are higher than euro bloc and Japanese short rates. U increase is stronger, the Fed is still tightening, and the twin deficits are beginning to shrink. In late spring 2005 the of recent origin media craze is the alleged housing fluid vesicle and how soon it will bust with God-awful issues All the same, suspects are warning of imminent disaster because real estate is a gold rush and a gigantic fluid vesicle The cover story of the April 11 2005 issue of advantageous old reliable Business Week was "After the Housing Boom: What the Coming Slowdown Means for the Economy and You." Fortune, Worth. The Economist. and the fresh York Times have all joined the chorus. I wonder"

--from Hedgehogging by means of Barton Biggs (John Wiley & Son 2006)

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