The First Ever Contrarian View of Markets?

“Is it possible that a young Man at present could pass his Time better, than in reading the History of Stocks, and knowing by what secret Springs they have sudden Ascents and Falls in the same Day?

Could he be better conducted on his Way to Wealth, which is the great Article of Life, than in a Treatise dated from Change-Alley by an able proficient there?

NOTHING COULD BE MORE USEFUL, THAN TO BE WELL INSTRUCTED IN HIS HOPE AND FEARS; TO BE DIFFIDENT WHEN OTHERS EXALT, AND WITH A SECRET JOY BUY WHEN OTHERS THINK IT THEIR INTEREST TO SELL.”

(SIR RICHARD STEELE, ~1695)  {My caps}

I think Graham and Buffet would agree with the capped statement. 

Steele was a proponent of the “Castles in the Air” theory – that stocks have no intrinsic value and are simply the product of investor psychology.

Steele also talked about the link to the height and extravagance of ladies’ headdresses, which peaked the year the 1695 London stock market collapsed, just as hemlines rose during the 1920’s stock market boom.

Basically, fashionable style, like a speculative movement, is subject to a popular consensus and follows a trend until it reached a point of extravagance, from which it can only retreat, (Chancellor, Devil Take the Hindmost).

I thought it interesting that some people were thinking about investor psychology, long before Psychology itself existed as a science, and that social and cultural behavior was influenced by stock market exuberance or decline – and vice versa!  Ladies Hemlines fell after the 1929 Crash too!