Public Opinion and Why you Cannot Listen to it
In my line of work I get asked incessantly about how I feel regarding this and that in the news regardless of whether it’s the Middle East or the value of the dollar or the political mess we are in, the value of gold, the end of the world, etc. Ironically, I probably get asked more about these things than I do about planning for retirement or investing philosophies.
The truth is, I really don’t care what the news du jour is. It is really of no matter what the media says. The media’s job, as counterintuitive as it is, is not to deliver news, it is to create buzz, attraction, followers and ratings. They don’t get paid for broadcasting the truth or reality.
What I do care about are the facts; something you will not get by watching TV or listening to the opinions of talking heads.
Below is an excerpt from the book “The Psychology of the Stock Market” written by G.C. Selden in 1912.
Inverted Reasoning And Its Consequences
It is hard for the average man to oppose what appears to be the general drift of public opinion. In the stock market this is perhaps harder than elsewhere; for we all realize that the prices of (securities) must, in the long run, be controlled by public opinion. The point we fail to remember is that public opinion in an (investment) market is measured in dollars, not in population. One man controlling one million dollars has double the weight of five hundred men with one thousand dollars each. Dollars are the horse-power of the markets-the mere number of men (and opinion) does not signify.
This is why the great body of opinion appears to be bullish at the top and bearish at the bottom. The multitude of small traders must be, as a plain necessity, long when prices are at the top and short or out of the market at the bottom. The very fact that they are long at the top shows that they have been supplied with stocks from some source.
Again, the man with one million dollars is a silent individual. The time when it was necessary for him to talk is past-his money now does the talking. But the one thousand men who have one thousand dollars each are conversational, fluent, verbose to the last degree.
It will be observed that the above course of reasoning leads up to the conclusion that most of those who talk about the market are more likely to be wrong than right, at least so far as (investment) fluctuations are concerned. This is not complimentary to the “moulders of public opinion,” but most seasoned newspaper readers will agree that it is true. The daily press reflects, in a general way, as a logical deduction from the fact of the case, likely to be bullish at high prices and bearish at low.
Despite this book being written so long ago, the lesson that it teaches is immense and still applies. If, and when, you hear someone talking about the investing markets and thier opinions it can generally be assumed that they are wrong. The same can be true of the media who gets paid to appeal to the masses. The fact is, the minority of people who typically are the majority of the dollars bares the most influence and is generally right.
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