Re: Birchtree's account talk
Golly Gee Rochester I do so hope you are wrong. As a contrarian I have to be bullish.
Since you're a Contrarian!
WELCOME TO TRUE CONTRARIAN! I will attempt to create an entertaining, readable, and hopefully refreshing viewpoint a few times each month. Each issue will feature my intermediate-term financial outlook, my long-term financial outlook, and a personal reminiscence.
In order to buy low and sell high, first you have to buy low. Stock markets worldwide are giving you a prime opportunity to do precisely that right now. --Steven Jon Kaplan
BUY NOW, BEFORE YOUR FRIENDS AND FAMILY JUMP IN (January 19, 2009): The global equity markets have been forming an important bullish pattern of higher lows over the past two months, while indices of implied volatility including VXO and VIX have been forming a pattern of lower highs since they had surged to 21-year peaks in the fourth quarter of 2008. Whenever this has happened in the past, a powerful worldwide stock-market rally has always ensued.
Most analysts have remained relentless in their forecast of a "deflationary depression", which is completely at odds with the facts on the ground.
GDX, a fund of gold mining shares which is my largest holding (see "current asset allocation" below), has nearly doubled from its bottom of October 24, 2008. If we were really going to have deflation, then the sector which responds most strongly to inflationary fears would not have surged so sharply during the past three months.
Insider buying of commodity-related shares in the fourth quarter of 2008 was the most pronounced in many commodity-share subsectors since the early 1990s. If we were really going to have deflation, then top executives of commodity-producing companies would not have been so aggressively purchasing their own shares. Remember that these same executives were aggressively selling in the spring of 2008, when everyone wanted to buy them at all-time peaks.
Exactly 1-1/2 years ago, there was a nearly unanimous consensus that inflation would remain at multi-decade lows--and then we had the strongest inflationary surge in eighteen years. Exactly a half year ago, almost all analysts agreed that inflation would continue to be the world's biggest economic problem--and then we had the greatest year-over-year drop in inflation since 1931. Now deflation is all the rage--and will be proven just as wrong as the previous two consensus opinions on this topic. You can consistently conclude that inflation will do exactly the opposite of whatever is the current trendy outlook.
Even many bearish analysts agree that stock markets worldwide are undervalued, while bullish analysts are afraid to go on record as saying "buy now". They're going to turn bullish as soon as the market surges another 20% or so, which will encourage momentum players, hedge funds, chart slaves, and much of the public to start buying stocks again.
An all-time record amount of money is currently sitting in risk-free time deposits including U.S. Treasuries and money-market funds, while concerted central-bank rate cuts have caused these deposits to continue to lose money relative to inflation. People will not tolerate negative real returns indefinitely. They are just waiting for others to jump in before they do. Financial analysts don't mind being wrong--they could hardly have been more misguided than they were in 2008--as long as they're wrong along with the vast majority of their peers. Misery may not love company, but it helps to avoid lawsuits.
Fear of losing money will transform itself into fear of missing out on the rally that everyone else will be enjoying. Buy now, before hedge funds and the general public realize what is going on.
Bearish analysts are confident about the S&P 500 soon going below 750. Bullish analysts are desperately hoping against hope for 1000. With too many investors gloomy and equity fund flows having been net negative since early October, the markets will surge far above these overly pessimistic forecasts. The S&P 500 will likely regain the 1300 level in the second half of 2009 which it has not touched on an intraday basis since September 2, 2008.
Be bold, especially on any down day. Act early. Profit enormously.
http://truecontrarian.com/
