On The Oscars, Bank Runs, And Picking Winning Stocks

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Photo by Mirko Fabian on UnsplashI’m not really a fan of awards shows. I’ve got a lot of other things to do besides watch celebrities celebrate each other. Oh, and don’t get me going on the value signaling.

But I do watch movies. Mostly old ones. Although for the first time in a long time, I actually saw one of the movies nominated for best picture. Only one of them. And I’m probably not alone in that category.

Top Gun: Maverick did something Hollywood really needed. It made people want to go to the theater again. You can count me among them. Granted, that was the only movie that compelled me since the last James Bond fiasco (see “Abandon Bond All Ye Who Enter,” Mendon-Honeoye Falls-Lima Sentinel, November 4, 2021).

In return for this gift, the powers that be nominated Top Gun: Maverick for “Best Picture.” It would never win, of course, but they truly believe it’s an honor merely to be nominated. But to make them feel less guilt, they’d have to nominate the film for a few other categories and award it one of the “lesser” Oscars. That’s just the way things go.

Did you guess Top Gun: Maverick would win the Oscar for “Best Sound”? I did.

My wife and daughters (and their friends) used to have an Oscar watch party at our house. During it, they’d play a game. They’d each guess who would win in each category. The one who picked the most correct winners would win the game. They still play this game, albeit remotely. Thanks, Covid.

But there was one thing that constantly irritated them. After they studied each movie intensely, measured each actor’s abilities, and scoured the critic’s critiques, they made their picks with the utmost of insight. Invariably, though, as I sat in the background working on my computer and paying little heed to the performance on the television, as well as with no knowledge of any of the movies or actors, I would consistently pick the correct winners.

Indeed, this year, I only missed two.

“How do you do that?” they would ask, half angry, half wanting to know my secret formula.

I’ll reveal the answer to the mystery now: I have no secret formula.

I don’t need to know anything more about any of the nominees accept the barest of superficial essentials. What I do need to know, however, is the voters.

Mind you, my day job requires me to constantly and continually scan the news. That’s a lot of headlines. Some of them are interesting enough to read the entire article. Some of them are throw-aways. Still others represent the key to understanding the latest jokes, fads, and memes.

It is this latter category that best informs me on the mindset of the Academy of Motion Picture Arts and Sciences. These are the folks who select the Oscar winners.

It doesn’t matter what I think about the nominees. What matters is what they think about the nominees. For some strange reason, I possess this uncanny ability to empathize with them. That’s how I pick the Oscar winners. When I lose that empathy, I’ll lose the ability to pick the winners.

How do I obtain this empathy? Call it an understanding of the madness of crowds. You might recognize the allusion to Charles MacKay’s classic book Extraordinary Popular Delusions and the Madness of Crowds. As dubious as the title sounds, it’s an instructive essay into the reality of behavioral psychology, particularly within the broader area of social psychology (although MacKay wrote the book nearly a half century before this field of study emerged in academia).

If you’ve ever seen a stampede, you know what I’m talking about. How does a stampede start? With one animal. Then with two. Then with three. Then with the entire herd. It’s like they all get FOMO (“Fear Of Missing Out”) all at once.

You can place humans in this same group of animals. Any time you see a fad, you’re watching a human stampede. Sometimes this rush is simply cute (everyone buying Cabbage Patch dolls), sometimes it is costly (as in any bank run), and sometimes it is deadly (most recently at the Rochester Armory when a human stampede for the exits left three dead).

How can you protect yourself from the ills of suffering through a human stampede? Learn to recognize the immediate causes.

If you watch an old western, you’ll see a cowboy fire a gun to start a stampede. In fact, it was a gunshot, or at least what sounded like a gunshot, that initiated the Armory stampede. So, keep your ears open for some random noise that might cause irrational panic. (Could Silicon Valley Bank be an example of this?)

Here’s the thing: if you’re in the middle of the crowd and a stampede starts, it’s very difficult to move against the current. You’ll be caught up and lose your fate to the crowd. Hint: Avoid being in the middle of the crowd – i.e., where all the action is – because it reduces your maneuverability and your flexibility.

On a final note, people usually ask me two questions about my day job. First, they ask me how I pick winning stocks. Second, they ask me why I work so hard studying investment disciplines and stock picking techniques which are the opposite of my own philosophy.

One answer addresses both questions.

It doesn’t matter what I think about any particular stock. What matters is what the other stock pickers think.

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