Thinking With Your Head
Why Contrarians always win!

Just a few personal thoughts on contrarian analysis. I do this often simply because as you look through history you continue to find one instance after another where human kind was faced with a rational decision, but nevertheless acted differently primarily because everyone else was.

How often do we think we should do something but don’t because of what someone else might think? Or know what’s right but decide to wait until it becomes a little more mainstream? How many of us go around saying “I should have done that, or why did I do that instead of following my first answer? How many times have we waited for a bus, got fed up and left and then found out from a friend that it came just as I left?

Being able to think in terms of emotion, often referred to as Emotional Intelligence, comes in handy if you’re in Hospitality or in Costumer Service. But not in Investing or of you have to get to work.

Just think about this next time you think, or don’t think, about making a trade:

If everyone is selling, that means that soon there will be no more sellers and investors will have to buy.

In the early 1970s everyone thought the economy was going to get better, they held onto stocks and forgot gold. In 1980 there was a panic. Cash dollars were thrown out openly to get even a quarter of an ounce of gold in their hands. When there were no more buyers, the floor for gold fell through.

Today, by contrast we face a similar sentiment. We say “The economy is doing fine. We will be able to keep borrowing in order to uphold our insane consumption habits”. We know its wrong but we nevertheless wait for confirmation.

Dear Readers, think how many people own stocks to sell them. Now think gold. Now think how many investors or single moms you know who are going to be selling their Bullion and Krugerrands if the need be.

Answer to first thought – Who doesn’t own a few MSFT or GOOG. Answer to second – What’s a Kruggerand?

Investing today doesn’t require Technical Analysis, a mathematical brain for Derivatives or a knack for crunching numbers as a Hedge Fund Manager. No, you have it easier. Just own real wealth. No credit cards, no stocks with 25 times earnings or risky bond collateral. Just real assets. Investing in 2007 – If you can touch it and understand it, own it.

Many weren’t around to remember 25, 50 or even 100 years back, but heck, that’s why we keep records. Isn’t it?

Positions in Gold and Silver

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