The proponents of long-term stock investing ignore the concept of stability; market averages dont take into account the dire consequences of war. Most equity markets around the world have been interrupted for multi-year periods by war. The author points to the fact that the equity market in Germany peaked before the German army ever lost a battle, and market bottoms in the US and Britain happened significantly before pivotal moments in the war benefited the Allies, and attempts to make the case that the collective wisdom of the crowd of stock market investors prevailed before the outcome of the war unfolded.
Wisdom of the Crowds: it is the collective judgment of crowds and their instincts that we should be respectful of.
The Crowd: A study of the popular mind Crowds can never accomplish acts demanding a high degree of intelligence and they are always inferior to the isolated individual.
Wealth, War & Wisdom offers several points: When asked or required to make judgments independently and in a rational way, the record of crowds is impressive. Strategists and economists often in the preamble to their reports boast that their view is contrary to the consensus as though that supposition alone is more important than all their analysis. It is a truism that human beings are reactive imitators and are subject to emotional extremes of euphoria and despair. Whether or not you agree with the books assertion that collectively the investor crowd often has superb intuitions about long-term events and that these judgments should be respected and followed the book still has enough to offer to make it an interesting read. I say, its all a gamble on the part of the investor; when the outlook is dire, equity prices are greatly reduced, and if you operate under the belief that the world and your way of life is not coming to an end youll have bought at extremely favorable prices. And if the world ends, or some type of planetary calamity overtakes life as we know it, your investments wont matter, youll have greater problems to address.