Safety in Numbers is an Investment Industry Created Illusion
And if you fall victim to it, it has serious consequences
I’ve made a very interesting observation, that with some feedback from subscribing members here and their permission to share their answers, I want to pass on to you that may ultimately save you from disaster in your future investment decisions. I only recently monetized this platform while publishing dozens of articles about the mechanisms of the investment game here for free for many months. And even though I monetized this platform just a few weeks ago, I noticed that the ratio of the number of paying to free subscribers really only picked up quite rapidly after I published a few articles that evaluated the predictions I’ve made here to reveal their accuracy in hindsight.
Of course, I wanted to understand the reasons behind this, as other marketing studies have discovered that people will gladly pay for guidance that’s the cost of a couple of cups of coffee per month if they find the guidance valuable, and even often continue paying for financial guidance that never even provides much value at all, as long as a person continues to work hard to keep his or her face in the media and is wrongly viewed as a “superstar” because of consistent media appearances.
This is What I Discovered
Before I monetized this platform, many of my published articles still consistently receiving around 1,000 to 2,000 individual reads ( I kept this platform free for as long as humanly possible until I no longer unfortunately could continue giving away my work for free, as a model of never charging anyone for a meal at a new restaurant will eventually fail, and fail quite quickly). Given that as of right now, I’m only closing in on 2,000 subscribers in total (free and paying), this means that many people found my articles interesting and valuable enough to share them with other non-subscribing members, that would then visit my platform on the reference of other regular visitors. This stat made me even more interested to discover why people were not converting into paying subscribers if, as a free subscriber, they believed my articles were so unlike others published on other financial sites that the number of reads on many of my articles doubled the number of my newsletter subscribers.
Thus, with a handful of people writing me short notes thanking me for the opinions I’ve issued here recently that either earned them a lot of money or saved them a lot of money (like a warning to abandon the ARKK ETF, after which it plunged by an additional 50%), I’ve taken the opportunity to pose three questions to them:
(1) How long have you been subscribed to my letter?;
(2) Were you invested in any of the assets about which I issued predictions?; and
(3) Did you not find that information valuable, and if so, why did you not subscribe until I published post-mortem analyses of my predictions?
For the handful of those that answered they had been subscribed (as a free subscriber) from the jump, I was curious to understand why they decided not to subscribe until after I posted a few post-mortem analyses of my past predictions that revealed them to be enormously accurate. And after securing their permission to share their answers with you, I believe that their answers can be enormously helpful to everyone here moving forward.
For the handful of subscribers that answered the above questions, they informed me that they had forgotten how accurate my past predictions were because they never acted on my predictions. If they had acted on them, they informed me that of course they would have remembered how accurate they had been. When I probed further and asked why they had not acted on my issued predictions, they responded that the community in which they were immersed unanimously mocked my dissenting opinion, and strongly suggested that they dismiss the opinions of an “outsider” that could never understand their internal positions.
For example, when I predicted that AMC stock prices had already seen its day in the sun and would only get crushed moving forward, some of those that answered my above questions informed me that they had actually been AMC shareholders when they read my article, but that they remembered thinking of how stupid was the opinion I issued. When I inquired as to why they believed my opinion to be stupid, especially since AMC prices started a deep plunge just a few trading days after I issued my warning that AMC prices were about to break down, they responded that they had been too heavily influenced by the opinions of a large AMC community that diametrically opposed my opinion. They revealed to me that because so many people disagreed with my take on AMC’s future price behavior, they never acted on my opinion because they genuinely felt as if so many people with money invested in a stock decided the best decision was to continue holding, that so many people could not be wrong. Consequently, because they never acted on my opinion, they did not benefit from it, and therefore the answer to question (3) above was that although the information I provided was valuable, because they did not personally benefit from it, they simply forgot that I ever warned them of the coming crash in AMC share prices.
I found these explanations to be extremely revelatory of how many retail investors feel a certain sense of comfort from facing in the same direction as the herd, in being reassured by the herd that their incorrect decisions are correct, and how difficult it is, at times, to break away from the herd completely. So, when they asked me how can they prevent making this mistake again in the future, I gave them the key to doing this in the conclusion to this article. Of course, acting on a dissenting opinion after it’s been proven correct will only have perhaps 2% of the benefit it would provide by acting on it before it’s proven correct. That’s not to say that every prediction I issue on this platform will prove to be correct and the masses will forever be wrong in their investment views. However, history tells us that the majority of investors are wrong the majority of the time, so simply holding a majority view on an asset should make you question and challenge your opinion, if it is the majority one, strongly enough to reach a conclusion that your opinion is one based upon independent research, and not just adopted from the consensus of the masses. In the investment game, safety in numbers is a delusion that more often than not, will lead you down an investment path that heads in the opposite direction from truth and success.
For example, I’ve written numerous times on my patreon platform, dating back to nearly a year ago, how USDT had too many unanswered questions about the composition of its reserves (that until just a few weeks ago, Tether executives allegedly claimed they addressed and fixed, though I still remain skeptical of these claims without the provision of hard proof to back them). I mentioned back then why it was a given that USDT would break the buck (which has since happened) and explicitly stated that Tether could experience a Luna Coin like crash if US regulators desired this outcome, because all they needed to do back then to cause a Luna Coin like crash was to subject USDT’s reserves to the same regulations of a US bank money market fund account. Despite this overwhelming risk to USDT’s peg to one USD, I don’t believe one person that read and listened to my multiple analyses of massive risk inherent in USDT actually acted on it.
Why did I come to this conclusion? Well, normally if a group of people act on guidance provided, at least one or two people of the group will write a quick note informing you that they acted on your guidance, especially if it contained information they did not previously know regarding the risk component. No one did, so I’m assuming no one acted on the information I provided on my patreon platform back in July, 2021 that I called “The Massive Tether BTC Problem”.
Nine months later, people are fleeing Tether after the Luna crash, with $3B sold in a single day and $7.6B redeemed this past week. Though it was encouraging that Tether did not seem to have much difficulty cashing out $3B in redemptions, since this only represented less than 4% of its market cap at the time, the real test to discover if Tether executives’ claims that it has massively shored up its previously questionable reserves to a composition of mostly short-term, highly liquid secure assets and cash, without definitive proof of this claim, would be a run on USDT in which more than 50% of its market cap was redeemed. Why more than 50%? Well, a “majority” claim about the very secure, highly liquid nature of USDT’s reserves would only necessitate 51% of reserves fitting such claims, as 51% fits the mathematical definition of majority, so only a greater than 50% redemption rate could prove this claim to be truthful absent of an independent documented accounting of all its reserves.
In any event, I consider those that just redeemed $7.6B this week very lucky to have gotten their money out of dodge before any event happens that really causes USDT’s prices to fall sharply. Already a breaking of the buck to $0.95 in USDT should be massively concerning as when US bank MMFs break the buck, usually we are talking about breaking the buck by one or two pennies at most. Breaking the buck by 5% is cause for concern of a much worse event ahead. But the lesson is this. To ignore analysts that dissent with the consensus view of the community, as a continuing behavior moving forward, is sure to cause a world of hurt in the future. When considering dissenting investment views, one does not want to be on the curve, and definitely not behind the curve (as all reactionary investors are), but the place to always dwell is to be well ahead of the curve.
This is not to say that one should listen to every dissenting view and act on it. I am merely stating that when dissenting views are presented with a load of facts (and the benefit of historical perspectives that outline repeating patterns throughout investment history), then one would be well-served to, at a minimum, integrate the presented dissenting beliefs in one’s investment strategy and behavior moving forward and to note that most times, following the investment herd is like being in the middle of a bait ball, believing one is safe simply because one is oblivious to schools of predators that lurk on the outside that remain unseen to the naked eye.
In investing, stick to SpecOp rules of learning from every mistake and never making the same mistake twice. If one was fooled by the herd once into making a horrible investment decision in which one was badly hurt, then shame on you if this happens to you again. Secondly, as I stated, a dissenting or contrarian view should not be adhered to, just because it is contrarian. That would be as foolish as following the herd view every time. However, the way to determine the guidance of which contrarians to consider versus ignore is simple. Review their documented track records of predictions, and follow those that have a documented track record of providing predictions that come true the majority of the time. It is near impossible for anyone that issues financial predictions to have even a 90% accuracy record, so anyone with a very strong track record of accuracy can be someone worth following. Likewise, anyone that simply gives you the weekly financial roundup of events after they happened without ever granting any accurate predictions about massive asset price crashes and rises before they happen (I believe a track record of both is necessary to illustrate the person really possesses some valuable knowledge) is someone you should definitely unfollow as they are very likely a much better salesperson than a legitimate financial analyst. I’ve been in this game for over two decades, and I’d say that the ratio of charlatans (remember millions of followers does not mean one is not a charlatan) to legitimate analysts is easily 1000:1.
I hope this helps everyone in the future make better and more profitable investment decisions! Have a blessed beautiful day everyone.
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