Extraordinary popular delusions and the madness of crowds

Real Investment Advice/Lance Roberts

“One of the signs that you have entered into a mania phase is when people have trouble absorbing non-conforming information. ‘Confirmation bias’ is a psychological behavior where individuals disregard any information which conflicts with their current beliefs. While that bias has always been problematic for investors, in recent years, as individuals lock themselves inside their “social media echo chambers,” it has worsened.”

USAGOLD note:  We’ve posted a few references over the past several months to Mackay’s book, Extraordinary Popular Delusions and the Madness of Crowds (1841). As a matter of fact, we think so much of it in the context of contemporary markets that we have it posted at our Gold Classics Library. “What is essential to survive a bubble,” says Roberts in the piece linked above, “is first to recognize you are in one.” The second, we would add, is to find a proven and reasonable way to hedge it. The chart below is telling in that regard.

overlay chart showing bubble market timeline with gold and silver superimposed 2021

Chart courtesy of GoldChartsRUs • • • Click to enlarge

Repost from 2-10-2021

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