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The Money Game by Adam Smith

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4. IS THE MARKET REALLY A CROWD?

“The crowd always loses,” wrote Mr. Fred C. Kelly in a noted work on the stock market in 1930, “because the crowd is always wrong. It is wrong because it behaves normally.”

What the crowd—or the public—or the market is up to is always a subject of speculation, for the crowd, according to investment mythology, must always be wrong. (The believers in this rule are numerous enough to constitute a crowd, but of course anyone speaking of the crowd believes himself to be outside of it.) In 1841 David Mackay published what is supposed to be the first good book on crowds, Extraordinary Popular Delusions and the Madness of Crowds. Mr. Mackay’s book, said Mr. Bernard M. Baruch, helped him to make his fortune, and one Wall ...

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