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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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.


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.”


Much of this cash has poured into commodities:


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


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




Phil's Favorites

Unbelievable Lie of the Day: Turkey Says It Had Not Recognized the Aircraft as Russian When it Shot it Down

Courtesy of Mish.

In the wake of conflicting flight path information with Russian and Turkey differing on the flight path of the Russian aircraft that Turkey downed over Syria, comes the incredulous claim that Turkey did not recognize the aircraft as Russian when it shot the aircraft down.

This unbelievable statement comes as Hollande and Putin Seek Common Ground but Remain at Odds Over Syrian Targets.
The leaders of France and Russia held more than three hours of talks at the Kremlin focusing on the fate of the Syrian president and on which parts of the armed opposition should be protected from air strikes.

The summit was part of Mr Hollande’s push for a broader coalition against Islamist radicals Isis after the attacks in Paris a ...

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Market News

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Financial Markets and Economy

Rich Asians Mostly Stick With Dollar Rally UBS Sees Almost Done (Bloomberg)

UBS Group AG, the world’s largest private bank, is telling its wealthy clients that the U.S. dollar’s gains are set to be limited as the Federal Reserve will probably tighten policy gradually after liftoff next month.

Switzerland is about to launch a huge experiment in 'the war on cash' (Business Insider)

A huge economic experiment will begin in Switzerland and Sweden in 2016, and some people are calling it ...

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Zero Hedge

They Sow The Cyclone - We Reap The Blowback

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Dan Sanchez via,

“For they have sown the wind, and they shall reap the whirlwind”?—?Hosea 8:7

It may be surprising to hear, but it is a plain historical fact that modern international jihad originated as an instrument of US foreign policy. The “great menace of our era” was built up by the CIA to wage a proxy war against the Soviets.

A 1973 coup in Afghanistan installed a new secular government that, while not fully communist, was Soviet-leaning. That was a capital offense from the perspective of America’s Cold War national...

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Chart School

Greatest risk to the stock market is?

Courtesy of Read the Ticker.

Nope it is not interest rates, nope it is not Donald Trump, it is!

It is the CRUDE OIL crash, simple!

Jim Willie has good comments in the first 40 min of this pod cast.

Energy company ...
- Debt is blowing up (See energy element of HYG).
- Hedging at oil $100 is coming to an end.
- Iran coming back to the market, more supply.
- Saudi still providing massive supply.
- Oil tankers holding oil parked in the ocean are coming in to harbor to unload
- US dollar strength supports lower oil prices
- World wide DEMAND slump for energy or deflation.
- More oil being sold outside the US Dollar
- The Oil futures can not be manipulated easily as folks actually ...

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All About Trends

Mid-Day Update

Reminder: David 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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Kimble Charting Solutions

S&P 500 – Dangerous for bull case, if prices turn weak here!

Courtesy of Chris Kimble.


The S&P 500 remains inside of a rising channel that has been in place since 2010. The 5-year trend is up.

The 5-month trend is a different story, at this time.

Over the past 5-months, the S&P 500 has created a series of “falling weekly closing highs,” which is represented by line (1) above.

The S&P is testing this falling resistance line at (2) above.

If weakness takes place at (2) above, at falling resistance, it would be concerning price action for the bullish case!


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Sector Detector: Bulls wrest back control of market direction, despite global adversity

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

Courtesy of Sabrient Systems and Gradient Analytics

Some weeks when I write this article there is little new to talk about from the prior week. It’s always the Fed, global QE, China growth, election chatter, oil prices, etc. And then there are times like this in which there is so much happening that I don’t know where to start. Of course, the biggest market-moving news came the weekend before last when Paris was put face-to-face with the depths of human depravity and savagery. And yet the stock market responded with its best week of the year. As a result, the key issues dominating the front page and election chatter have moved from the economy and jobs to national security and a real war (rather than police ...

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Swing trading portfolio - week of November 23rd, 2015

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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Digital Currencies

Bitcoin's Computing Network is More Powerful than 525 Googles and 10,000 Banks!

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

I've decided to build our startup - Veritaseum, a peer-to-peer financial services platform, directly on top of the Bitcoin Blockchain. Many queried why I would voluntarily give up a lucrative advisory and consulting business to chase virtual coins in cyberspace. That's exactly why I decided to do it. That level of misunderstanding of what is essentially the second coming of the Internet gave me a fundamental advantage over those who had deeper connections, more capital and more firepower. I was the first mover advantage holder.

You see, Bitcoin is not about coins, currency or price pops. It is a massive computing net...

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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! 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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Whitney Tilson On LL, EXACT, And Martin Shkreli


Whitney Tilson On LL, EXACT, And Martin Shkreli

Courtesy of Value Walk

1) The shares of one of my largest short positions (~3%), Exact Sciences, crashed by more than 46% yesterday. Below is the article I published this morning on SeekingAlpha, explaining why I think it’s still a great short and thus shorted more yesterday. Here’s a summary:

  • The U.S. Preventative Services Task Force’s Colorectal Cancer Screening Draft Recommendation issued yesterday is devastating for Exact Sciences’ only product, Cologuard.
  • I think this is the beginning of the end for the company.
  • My price target for the stock a year from now is $3, so I shorted more yes...

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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. 


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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 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.

Thank you for you time!

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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