Sentiment Speaks: You Better Behave Yourself In This Market

As I often do, when I go on vacation, I will take at least one book suggested to me by one of my members. And, on my recent pilgrimage to the House Of Mouse, I brought along the book “The Behavioral Investor,” written by Daniel Crosby.

While I do not necessarily agree with everything I read in the book, I think it has value for those who are still confounded by how our financial markets work.

You see, it is not about the latest news event or fundamental perspective which drives our market. As Bernard Baruch noted many years ago:

“All economic movements, by their very nature, are motivated by crowd psychology. Without due recognition of crowd-thinking … our theories of economics leave much to be desired. … It has always seemed to me that the periodic madness which afflicts mankind must reflect some deeply rooted trait in human nature — a trait akin to the force that motivates the migration of birds or the rush of lemmings to the sea … It is a force wholly impalpable … yet, knowledge of it is necessary to right judgments on passing events.”
And, the author clearly supports this perspective when he notes early on in the book that “[t]here is no understanding markets without understanding people.”