If this amazing article is correct (Barron's is the bomb!), that every fund manager is trying to trade against the perceived consensus opinion, then we have a good explanation for the current churn in the market....and the amazing resiliency of the market in the face of such overwhelmingly bad news. The big irony is that if the majority are trying to bet against the majority opinion, then we form a new majority opinion: stocks are under-valued and the economy will recover soon to justify current high prices. Because the fundamentals so clearly do not justify most stock valuations right now, and certainly not the overall valuation in the markets, we have a situation where stock (and market) movements become very erratic, unpredictable, and sometimes downright frustrating for anyone trying to trade on a short-term basis! It's the classic tug-of-war between buyers and sellers, and the winners are hard to predict. However, over time, as we have seen all year, gravity eventually wins and pulls everything toward historic valuations and returns.

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November 5, 2001

Fund of Information

Outfoxing the Consensus

Whatever it is, everybody -- but everybody -- agrees that's the goal

By MICHAEL SANTOLI djm

http://interactive.wsj.com/archive/retrieve.cgi?id=SB1004746052157203040.djm