Posts Tagged ‘contrarians’

On Stocks and the Costanza Paradox

Joshua sheds light on market absurdity using the Costanza analogy. – Ilene 

On Stocks and the Costanza Paradox

Courtesy of Joshua M Brown, The Reformed Broker  

 

 

George Costanza: "My life is the opposite of everything I want it to be. Every instinct I have, in every part of life, be it something to wear, something to eat … It’s all been wrong."

In a classic episode of Seinfeld called The Opposite, perma-loser George Costanza comes to the realization that if he would just act completely contrarily to his own instincts, things would begin to go his way.

Jerry Seinfeld: "If every instinct you have is wrong, then the opposite would have to be right."

One cannot help but see the parallels between George’s epiphany and the paradox of the high beta market rally that has left even the most experienced players in utter disbelief.

Think about how rewarding it’s been for traders who have completely violated any sense of prudence or market savvy:

*AIG ($AIG) barely avoids liquidation – buy it and enjoy percentage gains in the thousands!

*Unemployment remains at around 10%, inital jobless claims are still climbing – so buy some specialty or even luxury retailers!

*Mortgage rates are inching higher and housing has not truly bottomed – so snag some Hovnanian ($HOV), some lumber names and why not a little Home Depot ($HD).

*Oil breaks out above $85 – and the airlines go wild!

*Congress passes a de facto takeover of Healthcare – OMG!  Healthcare stocks are rallying on the news of their newly subjugated status!

*Commercial RE is a time bomb – REITs!  I gotta have more REITs!

We can document dozens of these types of paradoxical setups.  Investors are taking almost any opportunity to do the opposite of what they’d normally be expected to do.  If everyone in the market is a contrarian, is the true contrarian the non-contrarian?  Heh – "Whaaaaat is the deeeeaal with contrarians?"  Thanks, Jerry.

If Georgie was running a hedge fund right now and abiding by his counterintuitive life strategy, he’d be absolutely killing it.

George Costanza: "I tell you this, something is happening in my life. it’s all happening because I’m completely ignoring every urge towards common sense and good judgment I’ve ever had. This is no longer just some crazy notion. Jerry, this is my religion!"


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FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

Courteswy of The Pragmatic Capitalist

The January Merrill Lynch Fund Managers Survey showed very optimistic expectations from the majority of money managers.  This is a sharp change from last months survey when fund managers were entering 2009 with cautious optimism.  The latest survey showed the highest surge in Merrill’s Risk & Liquidity (46%) indicator since May of 2006.   In the past, this indicator has served as a fairly good contrarian indicator.

FMS1 FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

In terms of asset allocation, fund managers have turned substantially more aggressive.  Cash levels are now at their lowest levels since 2007.  Fund managers have aggressively deployed cash into the equity markets:

“Average cash balances have fallen to 3.4 percent, the lowest reading since mid 2007 and down significantly from 4.0 percent in December. Appetite for equities is strong. A net 52 percent of asset allocators are overweight equities, up sharply from a net 37 percent in December.”

FMS2 FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

Much of this cash has poured into commodities:

FMS3 FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

In terms of regions, the U.S. remains an underweight as investors continue to favor emerging markets:

FMS4 FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

This survey is showing some contrarian sell signals.  Just 45% of fund managers are protecting themselves against a downturn versus 52% in December.   The survey also shows a strong appetite for risk and high beta names. According to Merrill’s analysts the survey could be cause for alarm:

“This survey is one of the more bullish we have seen and suggests that investors buy into the idea that this recovery has legs,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research. “We are, however, seeing early signs that might alert contrarians looking for a selling opportunity – namely low cash allocations and possible complacency against a sell off in stocks,” said Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Global Research.

Source: ML

 


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A Contrarian Conundrum…and Some Quotations

A Contrarian Conundrum…and Some Quotations

Who is the real contrarian these days?

The Bears, who are dead right about how bad the economy is or the Bulls who are dead right for being long virtually every asset class, the riskier the better?  Perhaps the true contrarian is neutral right now, refusing to play either the economic weakness or the markets’ strength.  My head hurts.

Anyway, I put together a few notable quotations on contrarianism itself while you ponder the above conundrum.  Bon appetite…

The first gets to the very essence of contrarianism, from one of the most famous practitioners of this art, David Dreman:

“I paraphrase Lord Rothschild: ‘The time to buy is when there’s blood on the streets.’”

And the classic take from Warren Buffett:

“We simply attempt to be fearful when others are greedy, and to be greedy only when others are fearful.”

One from Bernie Schaeffer:

“As contrarians, the only thing to fear is the lack of fear itself”

Perhaps the greatest contrarian investor of all time, Sir John Templeton, weighs in:

“Bull markets are born on pessimism, grown on scepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”

Here’s a little-known contrarian gem from fund manager and legalized-heroin advocate George Soros:

“The worse a situation becomes the less it takes to turn it around, the bigger the upside.”

This one’s recent, but an instant classic nonetheless.  Arthur Cutten said it yesterday on Jesse’s Cafe Americain:

“But being a contrarian requires a superior sense of what is real, and what is out of synch with reality. In general few amateurs possess this level of judgement and perspective, and end up just looking silly and eccentric after a few correct calls, taking the opposite position because it is the opposite, proclaiming night to be day, and the moon to be cheese.”

These are my favorite contrarian investing quotes, let me know if I missed any good ones.

Art source: Nus Money.com

 


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Zero Hedge

Markets Around The World Are Crashing; Gold Soars

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Yesterday morning, when musing on the day's key event namely Yellen's congressional testimony, we dismissed the most recent bout of European bank euphoria which we said "will be brief if not validated by concrete actions, because while central banks have the luxury of jawboning, commercial banks are actually burning through funds - rapidly at that - and don't have the luxury of hoping for the best while doing nothing." This morning DB has wiped out all of yesterday's gain.

As for Yellen's testimony, we said that "she can send stocks reeling with one word out of place" ...



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Phil's Favorites

Capitulation

 

Capitulation 

Courtesy of Michael BatnickThe Irrelevant Investor

“One day it started raining, and it didn’t quit for four months” ~ Forrest Gump

What’s especially frustrating right now, besides the fact that the S&P 500 is now in a 13.2% drawdown, is that we’re not seeing any sense of panic. While every bounce attempt is getting smaller in both size and duration, the market has yet to do the proverbial flush that we all seam to be waiting for. The “all clear” moment, if you will.

The last time stocks were selling off like this was the summer of 2011 when the S&P 500 fell 21.58% pea...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Asia stocks subdued, safe-haven bonds still rule (Business Insider)

Asian shares sputtered on Thursday as U.S. Federal Reserve Chair Janet Yellen's tone of guarded optimism led to an indecisive finish for Wall Street and further weakness for the dollar.

While European banks found a moment of stability, a renewed rush to the safety of longer-term U.S. Treasury debt suggested the flight from risk was far from over.

Gold Soars Above $1,200 as Yellen Signals Go-Slow on Rates Path (Bloomberg)

Gold jumped to th...



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Chart School

Bears Win Day - Just...

Courtesy of Declan.

There wasn't a whole lot of change by the close of business, but intraday strength was clawed back in worrisome fashion. The end result was to leave spike highs in markets.

The S&P finished with a MACD 'sell' trigger, but on lower volume. The 'sell' trigger was below the bullish zero line, which makes it a strong signal.


The Nasdaq closed with a 'black' candlestick, which would be more bearish if it occurred at a swing high, but it's still a warning. Technicals are all in the bear camp.

...

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All About Trends

Mid-Day Update

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To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Kimble Charting Solutions

Transports working on breakout, after being hit very hard!

Courtesy of Chris Kimble.

When it comes to getting hit hard, the Dow Jones Transportation Index fits the bill over the past year. Few if any major indices have fallen harder, over the past 12-months.

Below looks at the DJ Transportation Index/S&P 500 ratio over the past decade. The ratio reflects that over the past year, the index has been much weaker than the broad markets.

CLICK ON CHART TO ENLARGE

The ratio hit channel resistance at (1) a year ago and decline almost as hard a...



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OpTrader

Swing trading portfolio - week of February 8th, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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ValueWalk

Why Most Investors Fail in the Stock Market

 

Why Most Investors Fail in the Stock Market

Courtesy of ValueWalk, by  

Throughout the past 30 days of wild volatility, here’s what I didn’t do.

Panic. Worry. Sell.

In fact, the best I did was add to a couple of positions yesterday. The world was already in an uncertain state for the past 3+ years. It’s just that with the market rising, we pushed the issue to the back of our  mind and ignored it.

If you read Howard Marks latest memo, ...



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Digital Currencies

2016 Theme #3: The Rise Of Independent (Non-State) Crypto-Currencies

Courtesy of Charles Hugh-Smith at Of Two Minds

A number of systemic, structural forces are intersecting in 2016. One is the rise of non-state, non-central-bank-issued crypto-currencies.

We all know money is created and distributed by governments and central banks. The reason is simple: control the money and you control everything.

The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies--money that is global and independent of any state or central bank, or indeed, any bank, as crypto-currencies are structurally peer-to-peer, meaning they don't require a bank to function: people can exchange crypto-currencies to pay for goods and services without a bank acting as a clearinghouse for all these transactions.

This doesn't just open t...



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Sabrient

Sector Detector: New Year brings new hope after bulls lose traction to close 2015

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Chart via Finviz

Courtesy of Sabrient Systems and Gradient Analytics

Last year, the S&P 500 large caps closed 2015 essentially flat on a total return basis, while the NASDAQ 100 showed a little better performance at +8.3% and the Russell 2000 small caps fell -5.9%. Overall, stocks disappointed even in the face of modest expectations, especially the small caps as market leadership was mostly limited to a handful of large and mega-cap darlings.

Notably, the full year chart for the S&P 500 looks very much like 2011. It got off to a good start, drifted sideways for...



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News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...



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Pharmboy

Baxter's Spinoff

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...



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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 

Since...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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