Beat the Crowd: How You Can Out-Invest the Herd by Thinking Differently

CHAPTER 3 Dracula and the Four Horsemen of the Media Apocalypse

As the last chapter said, you want to look for the elephant in the room—the big thing the herd overlooks. But we’re not quite there yet. Before knowing what to look for, you must know what not to look at! The media fails miserably at this. They most often look in the wrong place—leading most investors to look at the wrong things, too.

You can’t spot the elephant if you don’t look in the room. Yet very few folks do! Most stare out the window, looking at far-off specks that may never come. They gaze at sociological issues, peripheral chaos and academic debates—unimportant for markets. Or they peek just around the corner, always scared of what’s lurking.

None of this matters. Not the far future! Not sociology! Not what just happened! Not things everyone says could happen tomorrow! Markets aren’t far-sighted or myopic. They look about 3 to 30 months ahead and look hardest 12 to 18 months ahead. If we knew for a fact, with perfect 20/20 vision, the world would end on December 31, 2020, stocks wouldn’t start pricing it until about 2018 at the earliest. That’s the market’s version of 20/20 vision. Further out than about 30 months is to the market a blur not to be believed. It simply disbelieves.

Think of this chapter and the next as a primer on how to read your newspaper, peruse the Internet or watch CNBC, starting with how to know real news from short-term noise. How to slay vampires and battle the four horsemen of the ...