Time to Go Counter-Contrarian?

They say a good investor is someone who can think for himself and then go against the grain. It’s how John Templeton made a fortune picking up penny stocks during the depression, how Warren Buffett made billions after buying Coke after the Crash of 87 and how investors the world over buy and sell at prices that Mr. Market has failed to reevaluate.

From this comes the line “Those who buy headlines will end up selling newspapers”. The reasoning is quite simple. Unless you have some competitive edge on the market there is a good chance that by time you find out that a company is going to be announcing good earnings so did the rest of the general public. Some early day investors used to pick up the Wall Street Journal on their own before general delivery to be able to make their trades before the crowds did.

But every now and then, there seems to be a point when the the analysis reverts. People begin to doubt their respective newspapers that they held of so blindly. They begin to start thinking on their own and they realize they’ve been had. They begin to question what the future may actually bring, what proper valuations truly are and who’s side the media and the financial institutions really are on.

This time may be near. They used to say on Wall Street “Everything changes except for change itself”. Here are a couple of headlines that I see recently.

Marketwatch seems cautious as they proclaim headlines such as “With peak hurricane season approaching, it could be time to stock up on natural gas, cotton and orange juice while they’re still bargains.” or “After surprisingly strong first half for stocks the stage is set for volatility in the second half.” Bloomberg writes “Dollar Drops to Lowest in Almost a Month Against Euro as Inflation Eases”. Even equity-bullish The Street quietly notes “Dubai Bullish on Bullion”. Of course USA Today and CNN are both reluctant to infer that any bear market has taken the stage, but also seem a bit hesitant in cheering on the bulls.

So is Bear Sterns in for a ride? Have the natural resources seen their worse days pass? Is the market set for higher volatility? I can’t say for sure, but it would seem that those who sell headlines may end up buying newspapers.



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