It’s Different This Time

3rd Quarter 2008

It is said on Wall Street that the most financially damaging expression is, “It’s different this time.” An up or down trend gets established in an investment or economic market for a long time and human nature leads people to believe in its permanence. A look at the circumstances which drew this attitude in the past could tell us a great deal about where to invest as we look out into the fourth quarter of 2008.

At Smead Capital Management we invented a slogan to represent the crowd psychology which causes people of good logic to arrive at the opinion that “It’s different this time.” We call it a “Well Known Fact”. A “Well Known Fact” is a body of economic information which is not only “known” by everyone in the marketplace, but has been acted upon by nearly everyone who could participate. Joe Kennedy, the father of President John F. Kennedy, used the shoeshine boys in New York in 1929 as an indicator to determine that stocks were overvalued. They were giving him stock tips after his shoeshine. He turned around and bet against the market and made a killing on the downside in 1929-1932.

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