Investor sentiment has become so bearish that it’s bullish.
One of the hardest things to do is go “against” the prevailing bias regarding investing. Such is known as contrarian investing. One of the most famous contrarian investors is Howard Marks, who once stated:
“Resisting – and thereby achieving success as a contrarian – isn’t easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, particularly when momentum invariably makes pro-cyclical actions look correct for a while.
Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it’s challenging to be a lonely contrarian.”
Currently, everyone is bearish. As noted in “Stock Market Rollercoaster,” everything, everywhere, is bearish. CNBC is running “Markets In Turmoil” specials, and individuals get convinced the world is ending. However, as Howard Marks once stated
“In good times skepticism means recognizing the things that are too good to be true; that’s something everyone knows. But in bad times, it requires sensing when things are too bad to be true. People have a hard time doing that.
The things that terrify other people will probably terrify you too, but to be successful an investor has to be stalwart. After all, most of the time the world doesn’t end, and if you invest when everyone else thinks it will, you’re apt to get some bargains.“
Such is the point where investors make the most mistakes. Emotions make them want to sell. However, from a contrarian view, such is precisely the time you want to be a buyer.
But that is always a difficult thing to do.