Thursday, August 13, 2009
Are you really a contrarian?
Contrarian is probably one of the most overused labels in investing. Just about everyone likes to brag about how they went against the grain and made the call of the year or a lifetime. I think that there are probably significantly fewer real contrarians out there though. First of all, it's extremely hard to go against the crowd, in fact, it's against human nature. There are significant real and psychological rewards to going with the crowd. Secondly, going against the crowd often doesn't work out for the better. After all, you're betting against the the great mass of investors that move the market. Remember, John Maynard Keynes' famous line about the market can remain irrational longer than you can remain solvent? Raise your hand if you've lost money shorting a stock because your timing was just a bit off.
I'm going to list some of the great contrarian calls of the last decade. If you were in on them, than you're a far better (and richer)person than me.
Buying commodities in 1999.
Shorting tech stocks in 2000.
Buying AAPL in 2002.
Buying Chinese stocks in 2000.
Shorting Enron in 1999.
Shorting Lehman in 2008.
Shorting financials in 2007.
Buying the market in March of 2009.
Interestingly enough, Jim Rogers did three of these things. In fact, he was saying to short the money center banks back in 2006! That had to be painful, but ultimately very rewarding.
It's not easy being a contrarian. Think a little before you throw the term around loosely.