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The shadow edge is never on the edge, the time to contemplate the ending is before the ending.

It is interesting to see how people react to news and to forecasts, since in the financial sector, one does not need to spend much time "tuning in" to get bombarded daily with advice, opinion, and maybe even a wayward fact now and then. It is because of this tendency to overload on information that I believe that individual investors are better off tuning out much of the information available to them regarding the financial markets. It is also my belief that confirmation bias is a significant issue at major market reversals. Confirmation bias exists when you are more interested in seeking out information that confirms an already formulated viewpoint than in seeking information that might contradict your point of view. Confirmation bias builds as an economic trend continues because more information becomes available to confirm the trend, the number of people who believe in the trend increases, and therefore the memes associated with the trend spread more readily. Contagion of thought.

Case in point. Recently I was interviewed by a local newspaper in September. Two weeks later, when the interview was published, about half of the material was omitted. That's not surprising but what was surprising was which information was not used. Only the retrospective stuff was used discussing the bear market, whys, wherefores, scandals, etc, but none of the stuff I said about my beliefs about the future or strategies for the future were used. I had friends call me up and question me - "hey I thought you said to me that you were more bullish now, what changed your mind?" To which I replied, "nothing, if anything I am more bullish now than a month ago". Editorial license was clearly used on my interview to spin a bearish story. This goes on every day in the media. Bill Nygren at Oakmark commented similarly this week:

"I was getting calls in July almost daily from reporters saying that risk-averse investors should be looking to cut equities and add to bonds. When I would tell someone that was ludicrous, magically I wouldn't get quoted."

So you can see how the underlying themes behind a trend are constantly reinforced as a trend continues. One of the interesting things about applying random image tests to individuals and groups is the amazing way that opinions converge when pictures are presented to a group rather than to the individuals. When presenting an image to individuals, Rorshach found that one subject might see clouds, another a dog, a third a building etc. But when presented to a group there was a natural tendency to come up with one answer (definitely a dog). Once one individual suggested an image, there was a natural tendency for others in the group to see the same image (oh, yeah, now I see the dog), in other words, the group tended to think alike as a result of its interaction and discussion. This type of behavior is probably at its zenith at the end of a trend, because as a trend continues, there is a tendency for people to aggregate and for groups to form and get larger.

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