S & M

For those of a sexually curious nature, please don't get excited about the S&M in the blogroll.
This is shorthand for stumblingandmumbling, which is Chris Dillow's excellent, mainly economic musings.
Today, he has an excellent article describing how Main Street USA has actually been cutting back for some months, in anticipation of harder times to come, and what effects this will have longer term. He poses the question, is Main Street a better forecaster than Wall Street?
As we all know, a trend is a trend until it reverses, which the credit markets well and truly have.
But the main point is that in fact the herd is almost always wrong. A self-reinforcing truth is not necessarily true.
Adam Smith ( he of non-Scottish ilk) in his Paper Money book, talked about the fund managers that followed, not the herd, but the opposite - perhaps the runt.
Whenever they got a bit twitchy about the market, they would go to one of the big retail brokerages ( probably Merril) and watch the orders coming in from all over the country from Mr. and Mrs. America.
As long as the preponderance were sell orders, they knew they were right to be buyers.
The point, of course, is that, on average, everything is average. It's a bit like a sailing race when, if everyone goes one way, the line up at the start will almost certainly be the same at the finish. If, on the other hand, Mr. Cleverclogs veers away from the fleet and does his own thing, there is every possibility that he will end up the winner.
Or last.