STREET DOGS

From The Motley Fool:

The core of active investing is your ability to think against the crowd. As the classic Buffett saying goes, “be greedy when others are fearful, and fearful when others are greedy.”

But who are those “others ”? Not you, and not me, of course. At least that’s what we tell ourselves. No-one ever considers themselves part of the “others ”, though they must exist, somewhere. No matter our positions, we can think of a nameless group who disagrees with our views and declare ourselves contrarian.

But being a contrarian doesn’t mean you found someone who disagrees with you. It’s much harder and rarer than that.

Adam Parker, Morgan Stanley’s chief equity strategist, revealed that many of his clients claim to be contrarians, then proceed to tell him the same story with the same views. “Romanticising that you are a contrarian when you are indistinguishable from consensus can ’ t be good,” he wrote.

It can’t be good because a false sense of contrarianism offers assurance that you are on to something others don’t see.

What ’ s particularly dangerous is when you have support from others in the contrarian community

— feeling like a contrarian with the comfort and confirmation of peer support. Real contrarianism is painful. It’s lonely. It hurts. It’s when everyone thinks you’re nuts

The good news is that deep contrarianism isn’t necessary to achieve good returns. A market that generally agrees with you can still offer a nice long-term return, especially if your edge is found in being more patient than the crowd, rather than trying to outsmart it.

Too much effort is spent attempting to be contrarian for contrarian ’ s sake, when there’s plenty of room to get ahead being patient in a market where most people are pretty smart.

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