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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Mapping The Market

Will a $15/hr minimum wage "unleash the robot rebellion"?

"Can't have the little people make too much money or we will unleash the robot revolution." ~ Jean Luc

McDonald’s ex-CEO: $15/hr minimum wage will unleash the robot rebellion

Tells Fox Business a "$35,000 robotic arm" is cheaper than hiring, training mortals.

By 

For years, economists have been issuing predictions about how automation will impact the world's job markets, but ...



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Zero Hedge

In Today's Layoff News: Microsoft Fires 1,850; Intel Cuts 350; Shell Terminating 2,200

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

How do you know the Fed is justified in hiking again, the economy is recovering, and the market are zooming higher? One hint is the just announced thousands in layoffs in both the energy and tech sector, among which are Shell, which announced it would layoff 2,200 jobs; Microsoft reporting it would cut 1,850; and Intel terminating up to 350 jobs in Germany.

The details:

Shell Cuts 2,200 More Jobs, Bringing Total Losses to 12,500

  • Co. to make additional 2,200 job cuts by ...


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Chart School

Richmond Fed: Manufacturing Slows in May

Courtesy of Doug Short's Advisor Perspectives.

oday the Richmond Fed Manufacturing Composite Index fell 15 points to -1 from last month's 14. Investing.com had forecast 9.0. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 11.7, indicating expansion. The complete data series behind today's Richmond Fed manufacturing report (available here), which dates from November 1993.

Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.

...



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ValueWalk

TIP86: JACK SCHWAGER & STOCK MARKET WIZARDS (PART 2)

By Jacob Wolinsky. Originally published at ValueWalk.

TIP86: JACK SCHWAGER & STOCK MARKET WIZARDS (PART 2)

Published on May 23, 2016

Learn how to invest like Warren Buffett in Stig’s new video series. Watch the first two episodes for free here:...



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Phil's Favorites

Headlines to Ponder: ECB Warns of Populist Risk; French Authorities Raid Google

Courtesy of Mish.

What’s the real populist risk: Donald Trump and Nigel Farage?

How about the ECB, the European Commission, and the French authorities?

Perhaps a few headline stories can help answer the question.

ECB Warns of Populist Risk to Financial Stability

The Financial Times reports ECB Warns of Populist Risk to Financial Stability.

The ECB said in the latest edition of its twice-yearly Financial Stability Review that a rise in political risk “pose[s] a challenge to fiscal and structural reform implementation and, by extension, public debt sustainability”.

The report was published a da...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Global Stocks Broadly Higher, Reversing Early Losses (Wall Street Journal)

Global stocks climbed Tuesday, while the dollar strengthened against the euro and yen.

Shares, dollar climb as markets play Fed waiting game (Reuters)

European shares were heading for their best day in over a month on Tuesday as the waiting game to see whether the U.S. raises interest rates again next month sent the euro to its lowest since March.

Asian shares had stumbled to near 2-1/2-month lows ove...



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OpTrader

Swing trading portfolio - week of May 23rd, 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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Kimble Charting Solutions

Gold- Two-thirds odds prices fall on a support break

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Since the peak in 2011, Gold remains in a downtrend, creating a series of lower high and lower lows.

Gold’s rally in 2016 is attempting to break this 5-year falling trend, as it is attempting to break a series of lower highs.

Over the past 6-months, Gold could be creating a rising wedge pattern. This pattern two-thirds of the time, suggests lower prices are ahead.

...

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Digital Currencies

The Biggest Bitcoin Arbitrage Ever?

Courtesy of Chris at CapitalistExploits

Do you remember when you were growing up and all your friends were allowed Atari game consoles but you weren’t?

Well, I do and the things seemed as foreign to me as Venus. Mostly because the little time I managed to spend on the gaming consoles when my friends weren’t hogging them I found it all a bit silly. I never “got” computer games, and to this day still have poor comprehension of things like Angry Birds.

I suspect that many people around the world view Bitcoin in the same way as I view Angry Birds: with mild amusement and a general lack of understanding as to what the hell all the fuss is about.

I was thinking of this since a buddy of mine recently started ...



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All About Trends

Mid-Day Update

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

Click here for the full report.




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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Biotech

This Is Why Biotech Stocks May Explode Again

Reminder: Pharmboy and Ilene are available to chat with Members.

Here's an interesting article from Investor's Business Daily arguing that biotech stocks are beginning to recover from their recent declines, notwithstanding current weakness.

This Is Why Biotech Stocks May Explode Again

By 

Excerpt:

After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.

...



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Promotions

PSW is more than just stock talk!

 

We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

PhilStockWorld.com features the most important and most interesting news items from around the web, all day, every day!

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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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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