The foolish allure of conventional wisdom.

• Author: Biggs, Barton
• Position: Articles of magazines

"Another sentiment indicator is the media because they are invariably focused on what just has spectacularly happened (because that is what makes a good story) rather than what is about to happen. For years Business Week cover stories have been wonderful contrary indicators, and in fact, one friend of mine subscribes to the magazine for just that mason and has a cover collection. The rest of the print and TV business press also are notorious pilers on. A classic case was during 1979 to 1981 as oil prices and inflation surged. Numerous books were published by experts forecasting hyperinflation, depression, and a collapse of the dollar. At one point, seven out of the top ten books on the bestseller list were about inflation and how to survive it. Even wise investors like John Templeton gave speeches saying 7 percent to 8 percent inflation was inevitable. Of course, decades of disinflation, not inflation, were about to occur, during which both stocks and bonds would soar.

The most recent example was in December 2004 when the dollar was at its low. The Economist, probably the most respected business magazine in the world, ran a cover titled "The Disappearing Dollar." Shortly thereafter, Newsweek had a cover, "The Incredible Shrinking Dollar." There were numerous articles about how Warren Buffett was short the dollar in huge size, and another famous investor said being short was "a slam dunk." Wall Street economists ranted and raved about the twin deficits, a bearish...