Barton Biggs wrote columns to allow for people to help understand how he was seeing the world. For many years he was connected with Morgan Stanley helping to run its research, investment management division and the firm; later he left to manage his families money and others in a hedge fund. His columns from 2010 to 2012 were put together in the book Diary of a Hedgehog, John Wiley & Sons, 2012

What does it mean to listen to the market? There is always different reasons why people are  buying and selling stocks. Companies can be purchasing stocks as part of the buy backs, there are regular purchases for company purchase plans, options come due, new products being introduced, the company continues to make money, general themes change, new management, new plans, the weather affects the business, people selling to reduce holdings, to cash out, and a variety of other reasons. Many of the reasons have to deal with is the glass half full or half empty? Sometimes the analysts write glowing reports and the crowds react.

A popular book about crowds is Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds, Broadway, 1995. One of the more famous lines is “Men it has been well said, think in herd. It will be seen that they go mad in herds, which they only recover their senses slowly, and one by one”. Crowds tend to be late comers to the party, which means the early buyers tend to reap the biggest rewards. To avoid the crowds, is trying to figure out the contrarian point of view and not be a part of it.

Tacit knowledge is knowledge that is intuitive and instinctive, it cannot be easily summarized or communicated, for it is gained by people derived from a particular place, job or way of life. A stock market brings the information that people have gathered and its prices reflect all these hopes and fears and judgements.

The stock market is a wise and farseeing thing. Its wisdom is not on the little things, but it has tacit insights on the ebb and flow of great events. It consists of a very diverse, motivated, engaged, reasonably intelligent crowd.

Linking to dividend paying stocks, when the crowd jumps on the bandwagon, at some point there will be a correction. That is a natural thing and depending on what you have your money invested in, you may want to take some actions. If the bulk of your funds are in dividend paying stocks, and the companies continue to earn profits to pay for the dividends then allow the crowd to do its thing.

There are always more questions than answers, till the next time – to raising questions