2011, it turns out, was ‘the year to fade the mavens.’ Like a good running back, the financial markets juked the leading experts right out of their shoes:

  • Bill Gross, perhaps the most respected fixed income manager in the world, famously went short the long bond early in the year before watching it have its best year in fifteen.
  • Meredith Whitney, the analyst celebrated for calling the banking crisis, loudly derided municipal bonds, warning of massive defaults during the year. They never materialized and the bonds saw double-digit gains.
  • In the equity world, John Paulson, hedge fund guru of Goldman Sachs’ Abacus fame, boldly flipped bullish on the banks and his funds were presently crushed during the euro crisis.

What’s the moral of this story? In the words of Will Rogers, “never miss a chance to shut up.”

Our human nature already makes it very difficult for us to admit when we’re wrong. But when we own a widely esteemed reputation and publicly declare a contrary position, it seemingly becomes infinitely more difficult to do so.

The Greeks didn’t have the best of years in 2011 but they got one thing right a long time ago: the hazards of hubris are commonly underrated.

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