Let's talk about high conviction idiots and green shoots.

1. High conviction idiots.

I didn’t coin the term “high conviction idiots” but I love it nonetheless.

It’s the perfect term to describe someone who talks with absolute clarity and certainty about something they know absolutely nothing about.

And let’s be fair - we’ve all been a high conviction idiot in the past, and likely will be again. Whether it’s down to naivety, fatigue, or a heated conversation, I can recall a number of stories of my own high conviction idiocy in practice. 

Like when I kept pronouncing “The Old Melbourne Gaol” like it was a soccer match or I told someone at work I was going to “Netflix and Chill” with my wife before I knew what it implied… awkward.

But we see the same behaviour in listed land more often than most. 

That’s because public companies are complex. They are detailed. They change and evolve, and there’s a lot going on. That’s a confusing environment for people.

Most aren’t aware of what’s changing. Most don’t know how to be aware, or where to look, or to know when they’re in the wrong and how to rectify that. In short, you can’t stop people from becoming high conviction idiots.

But you can use them to help others.

The trick is - you still want them to ask their question or state their “fact.” If they don’t state it, or don’t ask it, then they still think it. That’s even worse because it means you’re the one who is unaware and can’t do a thing about it.

You want these people to speak up because it gives you the opportunity to correct them and address it. Doing it publicly is the best solution because it answers their question and clarifies it for other investors, but doing it privately works as well.

Inviting questions, being accessible, being non-judgemental in your replies, is the best way to leverage high conviction idiots for the benefits of everyone else.

2. Green shoots in the market.

A large high net worth called me this week.

Someone who has been out of the market for the last couple of years. He called the downturn well at the start 2022, and has been out since then - checking in on the market every month or two.

I haven’t spoken to him in 18 months but he called this week because he thinks it might be on. Here’s his thinking:  

1. Because people have been “stuck” in small-cap stocks, any good news has been met with a momentum sell-off as people get off the train quickly. This has been the case since 2023.
2. A lot of these positions have been cleared out over the past couple of years with new investors entering in at lower levels.
3. Brokers have been pumpy and flighty, but in his conversations now seem a lot more controlled and focused.
4. The $4bn raise by Goodman Group on Wednesday wasn't a small-cap raise, but it’s the second largest placement on the ASX ever. This gives confidence to investors and gives big fees to brokers which gets them moving.
5. You need three things to move the market. (1) Investors are confident they can make money, (2) brokers are driven by making money, and (3) companies are re-energised and invigorated.
6. Recently, there have been a number of companies that have had momentum and kept it. Some great small-cap examples are Ausquest, Raiz, ETM, and more that have all had positive news and aren’t slowing down.

Given all this, the market may be ready to strike back! He’s definitely more excited now that he’s been for the past few years - and maybe that’s a sign that the market is coming back.

So there we have it, two topics that have stuck out this week, from lots of conversations with listed leaders and high net worths. 

Let me know if this has come up for you in your network or there’s something else on everyone’s mind.

Cheers,

Ben