He shows research from 1971 to 1981 that demonstrates investment advisers' sentiments lag the market. They advocate playing the stock market's current direction. The problem with lagging the market is that analysts get brave at the wrong time and cautious at the wrong time.
He shows evidence of a widespread failure of the largest and best staffed money manager firms in spite of their training, resources, experience and intelligence. Dreman believes that much of the failure is due to investor psychology. He counsels that history has shown that when people act blindly in groups and consensus is at its greatest is when the largest errors are made. He sets the stage for future chapters by indicating he will show that being a contrarian and doing the opposite of the masses is a great strategy with good odds of making good money.
Dreman makes a memorable quote well worth repeating here: Napoleon once said that "in warfare, the psychological is to the material as three to one". Dreman observes that in the stock market, the ratio is as least as important as in Napoleon's observation of warfare.
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