The stock market is the only place where heightened optimism and extreme pessimism actively coexist. The same investor who is overly optimistic about one set of investments is strongly pessimistic about another. The majority view is also prone to holding both judgments at the same time. It is only a small subset of people within the market who hold a view contrarian to that of the majority. This minority differs clearly from the majority. The majority thinks very much like a herd. To go against the majority is seldom easy. Everybody will vehemently disagree with you. Even to put forth a contrarian view in a public domain requires enormous courage. Contrarian conviction will be virulently challenged. Such challenges will be born out of the insecurity of the majority rather than superior conviction. Often, weak conviction makes a more virulent challenge. Such virulence is surely not born out of logic or basis. It is merely born out of the necessity to manage the insecurity of a large section. The majority fights contrarian opinion with its might. Typical tendency is to put forth short term investment performance to bolster one’s own position. The majority always fails to realise that short term investment performance is often the outcome of their own irrational behaviour. Such times are usually testing for the contrarian minority. Staying together and keeping faith is never easy. But, that is what it takes to tide over periods of extreme investment behaviour.
Every once in a while, the market does something so stupid it takes your breath away.”- Jim Cramer