MICHEL PIREU: The gorilla in the room is that the market is right all the time
When you start believing you can beat the herd or you are contrarian it’s time to think again
There are some things that may be hard for investors to hear about being average and being fallible. • If you think you’re contrarian, you’re much like everyone else. "The main questions investors ask us seem to be about the exterior appearance of the market," Adam Parker once wrote in a note to Morgan Stanley clients. "‘What is this price action telling you?’ ‘What are other investors asking you about?’ ‘How are other people positioned?’ or, ‘What’s the current sentiment?’ ‘I’m a contrarian by nature’ they go on to say. "Romanticising that you are a contrarian when you are indistinguishable from consensus can’t be good," says Parker. "But the belief among many managers that their perspective is unique or contrarian, while everyone else’s is mainstream, seems … surprisingly common." Therein lies the paradox. Everyone thinks of themselves as above average, which is a very average thing to do. As Parker went on to point out: "The problem with sentiment as an indicator is that the data...
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