Across America, there are multiple times a year where consumers flood retail outlets looking for last-minute items. Parking lots are packed as if there was a concert for the biggest multi-platinum selling artist in the world, except it’s the typical herd mentality at work.
Human behavior, for the most part, hasn’t evolved. For this reason, financial markets have become a breeding ground for exploiting crowd psychology. Last year was a difficult year for everyone. Currently, schools around the country are opening their doors again for face-to-face learning for the first time since March 2020. Retail stores are jam-packed as last-minute shoppers buy school supplies. Frustration mounts as parents realize they must stand in long lines or travel to multiple stores, only to find empty shelves with limited inventory.
What if we did things the contrarian way?
Throughout 2020, after the pandemic started, most schools were virtual. School supplies went from being in demand to almost non-existent. This would have been the perfect time to load up on school supplies, while everyone else ignored the opportunity. Discounts were provided across the board as retailers were desperate to gain sales. This plays directly into how a contrarian sees the market. Investors wait until the last minute and flood the market, only to find themselves fighting over what little is left, while the smart investors have already established their positions before the crowd.
When is the best time to buy a coat: in the winter or during the summer? I hope you said summer. Bargains are best during the off-season. Cryptocurrencies, stocks, and other assets have seasons (or as we call them, cycles). Those who understand how these cycles provide opportunities will be in a better position than those who wait until the last minute.
Do we want to follow the masses of last-minute actions, or do we want to be proactive? Which season are your assets in currently? A farmer doesn’t plant seeds in the summer. There is a time and place for everything. More investors will enter the crypto market when prices are at all-time highs than at all-time lows. As contrarians, we build our wealth in silence and sell in noise -- and that means not waiting until the last minute to accumulate your inventory.
May the horse be with you!
Author: Eric White