No Such Thing as an Opportunity without Optimism

We live in a culture of pessimism as evidenced by a constant barrage of gloom and doom headlines in the media. In fact, the hyperactive media of the 21st century never seems to let up on the notion that we are living in a world that is becoming exponentially bleak. This is, however, not a new phenomenon, but rather exaggerated beyond measure as we devolve into the “instant information age” (please note that they don’t call it the “knowledge age”). Hence, as we thirst for our information dosages “quick and easy” in our daily information consumption regimen, let’s try to monitor the pessimistic slant predominant in the average newsbyte. If we do so, we may be able to see something that most others will neglect. Follow me on this for a minute.

In order for this theory to effectively sink in and gain traction, we need to come to a consensus before we move forward. If you agree that the media has been on a negativity binge since day one, we are off to the start of a critical breakthrough in terms of positioning our mindset to capitalize on the truest means of counter-intuitivism. In other words, in order for us to take advantage of the negativity in the news and capitalize on many opportunities others are missing, we must first get our heads around the idea that many (if not most) people are hypnotized by the paralyzing negativity prevalent in today’s headlines.  Are you with me so far? Great! 

When was the last time you saw a pessimist cashing in on a great opportunity? Note that even market shorts (those who bet against certain stocks or markets) are optimistic about their prospects. It really starts to make sense if you think about it long enough: All of the seemingly cancerous negativity prevalent in the headlines seems to infect so many (if not most) people these days. So where is the opportunity in this theory?

If conventional wisdom, or popular opinion, is unrealistically slanted toward a negative bias, then why not play the other side of the equation? This means questioning popular opinion every time it presents itself. 

Here’s a great example: On February 11th of this year, Rasmussenreports.com published a survey citing that 64% of Americans still think we are in a recession. When the actual facts from the National Bureau of Economic Research indicates that the recession ended in the 3rd quarter of 2009, as measured by real GDP, which is the actual definition of recession. So what do we draw from this? It means that nearly 2/3 of Americans got it wrong as a likely result of a negative and wholly backward perception. To put icing on this cake, nearly 2/3 of Americans were wrong 16 months after the fact. I don’t need to explain why. 




Moreover, all four fiscal quarters of 2010 showed GDP growth1, sequential corporate earnings growth2, and positive job creation in every single month3.




The point of this blog is to appeal to extraordinary thinkers to question conventional wisdom, or popular opinion, whenever possible. The result of this exercise is to see where an opportunity exists when the ordinary thinker misses it. Contact me directly to put this theory to work in your investment management strategy. 

D. Scott Bloom, CFP®

Sources:

1.        National Bureau of Economic Research (NBER)

2.        Standard & Poor’s (S&P)

3.        Bureau of Labor Statistics (BLS) 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor before investing. All performance referenced is historical and is no guarantee of future results.

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