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!"
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.
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 Cuttensaid 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.
A gang of 27 EU nations hit the UK with a parade of impossible demands. All the countries demand the UK grant free movement of people, but that is why the UK left.
In addition, Spain wants joint sovereignty over Gibraltar, Malta demands the UK get an “inferior” deal, the Czech Republic says “Four freedoms or no freedoms”, and Lithuania says the UK should “pay if they stay.”
For its part, the gang of 27 believe the UK has an impossible demand on immigration control that they cannot accept. If neither side gives, and that is increasingly likely, a hard Brexit looms, very hard.
Gang of 27 Demands
Four freedoms or no freedoms. The main sticking point is immigratio...
Despite all his cajoling and fearmongery, President Obama lost his veto-override virginity today... and is not happy. Speaking at a CNN town hall this evening, the president said that Congress "made a mistake," and, as The Hill reports, trotted out the tired old excuse that despte their noble intentions, this elimination of sovereign immunity could have unintended consequences.
A decision by the U.S. Securities and Exchange Commission may bring European Union banks a step closer to avoiding billions of dollars of capital charges on their trades in derivatives and other securities.
In early 2009, the seven largest publicly traded college operators were worth a combined $51 billion. Today, they’ve been all but wiped out.
When Barack Obama took office, America’s seven largest publicly traded college operators were worth a combined $51 billion, with more than 815,000 students enrolled at campuses spread across the country. The schools were flooded with with people seeking shelter from the recession, returning to school to pick up new skills.
Almost eight years later, the industry has been decimated. The seven largest listed operators are worth just over $6 billion, and the most valuable co...
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
I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer. One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."
Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.
Genetic components are the DNA sequences that are 'inherited.' Some of these genes are stronger than others in their expression (e.g., eye color). Yet, some genes turn on or off due to external factors (environmental), and it is und...
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Site owned and operated by PSW Investments, LLC. Contact us at: 403 Central Avenue, Hawthorne, NJ 07506. Phone: (201) 743-8009. Email: email@example.com.