Today’s short term news reads like the prelude to a crash: rentals surge as foreclosures climb, US consumer confidence at 5-month low, BP forced to sell assets as profits slump, China unveils huge sub-prime lending disaster, long-term economic pain for US families, Obama lending programme set to increase junk bond risks, and confrontation looms between Cable and UK Banks.

Out there on the trading floors, stampeding herds are yelling at each other, desperate to buy one minute and sell the next. Using the bull and bear distinction on that floor would these days tell you nothing about which was which. It’s just a fighting, pulsating mass of news-junkie Herds.

In quieter offices often miles from the nearest Bourse, the screens are on but only rarely consulted. The aircon hisses gently as groups of market watchers, managers, advisers and gurus variously shoot the breeze, float strategies, brief clients, or plot the downfall of anything from an underperforming company to a national currency. They are members of an exclusive club, and none of them ever goes with any herd. For these are the Heads.

It’s important to remember these distinctions, because the Herds are usually anything from 75 to 95% of the opinion out there – and they do not make money for other people unless the market is more gung-ho than a bull on steroids. More often than not, they are late in, late out, and following the rules of the era before the one they’re in. Over the last fifty-five years, they’ve had enough good times to justify their existence, and enough crowd-cover to disguise their inadequacies: “It was totally unexpected, everyone was taken by surprise, there was nothing we could have done”. (Sadly, almost all politicians are members of a herd).

All that has now changed – and for at least a decade to come, probably more. The cool heads until now have been the ones who had private jets and owned whole islands. From now on, they’ll be the ones who get to swim to any island refuge without drowning. So as I say, today more than ever it’s important to know whether you’re being advised by a Head or a Herd.

Herds are driven by drama, sensation, peers, optimism, booze, testosterone, tactics, hesitation, impulse, and new paradigms.

Heads drive. They watch, listen, analyse, study disciplines outside finance, watch for agendas, use commonsense, learn which rules can never be broken, ignore peers, prefer reality to optimism, and always extrapolate consequences from events.

Here’s how to tell them apart: the Herds are usually to be found noisily swilling Bolly in the waterholes. They were for Thatcher, and then Blair. Living as they do in a Herd, they are full of bullshit. The Heads are soft-spoken and rarely if ever reveal their politics. Living as they do the life of a contrarian, they are full of quiet confidence.