The Contrarian’s Time to Shine

The market is such a dynamic system filled with black swans, paradoxes, and anomalies. For example, following the stock market crash of 1987 the American economy boomed, which intuitively doesn’t make sense. If stocks were really a leading indicator, as the efficient market theory implies, we should have experienced a Depression in 1987. All these theories we’ve come to accept are dead wrong, and this is why I approach markets which an open mind; I know these kind of “anomalies” occur often.

It’s probably because I’m a bit of a nerd, but I get really excited sitting and thinking about what the next big trade will be. Regular readers of this blog know that I believe real estate is going to be perhaps the biggest contrarian play out there, especially because unemployment is going to rise. By this time next year, everyone will know the economy is slowing and bearishness will increase dramatically. Since I admit that the economy will stagnate and unemployment will rise, I probably seem nuts to even conceive of buying real estate. Well this is a position I love. I am not so much looking at the strength of our economy, but the likely flow of capital.

Public vs Private

Where does confidence reside? Anyone with a pulse knows the vitriol between the public and private sector is heating up. If confidence does not reside in the public sector, it de facto resides in the private sector. When people lose confidence, they flee from all things government, and that includes the currency. Devaluation alone guarantees that private assets will rise dramatically in nominal terms. The shift of capital from government bonds to private assets will take care of the rest.

Some of the best emails I receive are from people who have lost faith in financial advisers and have decided to take control over their investments. I think this is great. The powers that be would like you to believe that we plebeians are just not smart enough to understand sophisticated investments. Well last time I checked these clowns on Wall Street aren’t either. Do people forget that absent a massive government bailout, even the almighty Goldman Sachs was on the verge of failure? I openly scoff at these self-proclaimed masters of the universe; I don’t need to manipulate markets to make money, thank you very much.

Having the prettiest excel spreadsheets is not where your advantage will be. All the investment banks had all the right data, the latest computers, and scores of the “smartest” graduates in America. Look where that got them. It is the feel for markets that comes from being truly objective that will take you far in these markets.  This “feel” is your rudder; without it you have no direction.

Our leaders have no rudder and they are driving us straight over a cliff. This crisis is really going to open eyes, and I feel very fortunate to have the opportunity to tell the truth throughout this crisis in real-time.

The Contrarian’s Time to Shine is a post from: Expected Returns

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