Catching the contrarian wave: The wave to success

[always_learning]

I read a statement by Kevin Hogan ("influence peddler") he said

When the public overwhelmingly believes...anything...you can pretty much assure yourself of success by going the other way.

Personally I have found most of my successes lie in going against the flow of general public perception, and my failures by going with the flow. How about the other forumites? Have you found success going with or against public opinion?

 

[Sunfish]

When the public overwhelmingly believes...anything...you can pretty much assure yourself of success by going the other way.

This is, of course, a truism. The difficulty is that "the public" is not like a great river where everything goes in one direction. There are always smarter people than you. They cause an eddy in a different direction. So you find these smarter people and follow them, but how do you know they have the same goals as you? How the hell can you even pick the smart ones?

Then there are the gold bugs heading off somewhere else, the silver fundamentalists convinced they are right, the property investors who would never take a risk in shares, Aunt Maud who was once told "never deposit your money with a bank, Buy it!". Need I go on?

The set is made up of thousands of sub-sets so that the future confronting an investor is like that which confronts a white water canoeist: a maelstrom of currents and eddies, rocks and cascades. Everyone wants to get to the smooth water but we all have different views on how to get there.

Contrarianism is dangerous. Good investors do indeed ride the train with the mugs. They just know to get off before the wreck.

Thommo

 

[aussierogue]

interesting

as a trader i try and pick the beginning and end of cycles. or atleast look for patterns....

going with the flow is a good idea if your at the start of a cycle and being contrarian is wise at the end of a cycle. the oppsosite will get you in trouble..

 

[Brizzy Boy]

I know I have said previously that I am new to investing, (13 months a blink of an eye in long term investing), a number of my close friends invest in IP's I have found IP's on my own and have gone back to them for their advice about my choice before I signed on the dotted line. To tell you the truth their advice was a little short of devastating. Yet my "GUT FEEL" and my sums kept telling me different, I have bought 3 IP's in the last 13 months, have 6.5 to 7.5% gross and by bank valuations a 33% CG in the last 9 months. A couple of my friends are looking at selling an IP or two at present. I know it is only early days for me but at the moment it looks to me because I went against the flow I am having the better results.

I have a lot to learn and still will ask advise of my friends as they have been at this many years, but the final decision will finally rest with me. "will I follow the tide or against?"

Cheers
John

 

[qaz]

I agree with Thommo. Often the market is right.........

I think the key is to invest where there is value rather than trying to be a momentum or a contrarian investor. I mean theres people who bought shares in companies like HIH right up to the last day of its existance. It was contrarian, but was it smart?.

 

[always_learning]

Here are a few beliefs that think could be reviewed

• China is on the rise!
• The US$ is going down!
• The Euro will continue to be strong.
• Australia is going to move from strength to strength and the stock market will move up on the back of growth in China and Asian neighbors, sucking up our raw materials, foods, services, education.
• Japan will fall! China will dominate the region.
• Interest rates are likely to move up.
• Camila wont become queen of Australia.
• Michael Jackson is too rich to be found guilty.

 

[shaunwalker]

hey, always learning, love your post script.

one i say to people, when they tell me money cant buy you happiness,
i normally reply, true... but it certainly takes the edge off being poor!

cheers
shaun

 

[always_learning]

hey, always learning, love your post script.

one i say to people, when they tell me money cant buy you happiness,
i normally reply, true... but it certainly takes the edge off being poor!

cheers
shaun

Diamond Dave (David Lee Roth) ...certainly could come up with some great (amusing not deap level) stuff!
(and with that I just changed my signature)

 

[Sultan of Swing]

Here are a few beliefs that think could be reviewed

• China is on the rise!
• The US$ is going down!
• The Euro will continue to be strong.
  [*] Australia is going to move from strength to strength and the stock market will move up on the back of growth in China and Asian neighbors, sucking up our raw materials, foods, services, education.
  [*] Japan will fall! China will dominate the region.
• Interest rates are likely to move up.
• Camila wont become queen of Australia.
• Michael Jackson is too rich to be found guilty.

Interesting Comments AL

In relation to points d & e.

I'm fairly uneducated when it comes to global economics. I realise our Australian economy has been doing ok the last few years. I know the dollar is up agaist the $US but the way i see it is the $US is falling, ours isn't rising. How are we doing in relation to the other large world economies?

Secondly, Japan will fall, China will dominate? I can see China is moving ahead, but can you tell me why you say that Japan will fall?

Cheers

BTW Love the new signature. Much better!!

 

[quiggles]

AL isn't claiming that Japan will fall, it's just that there's been so much doom and gloom associated with Japan and so much hype with China that's it's time to reassess these verities.

I tend to agreee - the Japanese really lost there way a while back and need to break down the huge rural gerrymanders and influence peddling networks that cripple their economy. It can be done, but I suspect there's more pain in store and I don't know if Koizumi has the guts for it. However, the demise of the Japanes economy, even for the moment, has been greatly exaggerated.

China, OTOH, is not a tiger, it is trying to ride one. The current leadership are trying to stay in control of a command economy which is is vanishing, or at least parlay that into control over immense wealth and power. They aren't doing a bad job, but when times get murky it will be interesting.

Chinese stagflation would be a world economic nightmare.

 

[likewow]

As the world relies economically on a fast growing China and it eventually becomes the worlds largest and most powerful economy it will want political influence and power in proportion (just as America has done this century). Scary concept that and will be interesting to see how America attempts to hold on to the power it has become accustomed to as the worlds only true economic and military super power.

 

[quiggles]

I would have been more concerned about the Soviet Union, which dealt more directly in power than in money. It crumbled internally and I suspect that the US, if it doesn't wake up, may do the same.

I don't see the will to cause global chaos in defence of crumbling prestige - the chaos it does cause stems from its concept of global supremacy.

 

[Bear924]

Last year I read 'the rise and fall of the great powers', which looked at the great empires from 1500 on. This book clearly demonstrated that to have military might one needs to have economic might else a country goes broke trying to pretend to have a strong military. China was once the most advanced civilisation on earth and probably should have been the world superpower however it broke down internally.

I reckon America needs to buy as much of China as it can, while it is still able, if you can't beat something then you should at least own it.

 

[quiggles]

China was once the most advanced civilisation on earth and probably should have been the world superpower however it broke down internally.

China lost its way through corruption, isolationism (especially by the ruling classes from their own people and a society that stifled innovation entirely. It was totally ripe for the fall by the time the English came calling. The miracle is that it has come back so soon.

I reckon America needs to buy as much of China as it can, while it is still able, if you can't beat something then you should at least own it.

The trouble is, it sometimes doesn't stay bought (although your money stays spent ). Rule of law is still a tricky concept there, and one fraught with risk.

 

[Peter 14.7]

HI All

I don't necessarily see the US falling over. Instead China and India will simply add to the overall wealth. Like the rise of Japan in the 1970's and 80's, it may dint the US but other have come and go there.

I may be wrong but just because one go us another must not come down. Remember the US is a world leader in innovative thinking and world culture. How many Chinese wear Nikes. A lot. Why not a no-name brand at 1/10th of the price. Culture and fashion.

I think the EU will stagnate as it essentially reaches it limit of growth, resorces and space. But thats Europe anyhow. They are relaxed and comfortable over therefrom my visits.

But good old Aust is mineral rich and population poor. We have lots of fresh air, clean water and safe food. ONly NZ is better off than Australia. Welike immigrants no mattter the colour, language, religion, etc.. and immigrants know that.

We will never be a world computing power but whilst you can live without computers you always need food.

Peter 147

 

[pete_w]

dont forget, china is big but its GDP is still quite small.

http://www.worldfactsandfigures.com/gdp_country_desc.php

 

[quiggles]

I wouldn't trust Chinese statistics as far as I could throw Tianenmin Square.

That said, the GDP figures probably aren't too far out as the vast bulk of production is in the eastern provinces, which may well have better figures.

 

[qaz]

dont forget, china is big but its GDP is still quite small.

http://www.worldfactsandfigures.com/gdp_country_desc.php

Interestingly, that site lists GDP per capita as $28,900 for Australia in 2003. In my uni course notes it lists GDP per capita as $38,900 in 2005. Thats a 35% jump in 2 years.

 

[always_learning]

I think you will find it is US$ so the AUD$39K = US$31K and around the $29K mark using Jan 2004's US$0.75/AUD$1 exchange rate.

 

[Peter 14.7]

I personally use a more simple measure measurement of wealth than GDP and that is consumerable.

When some one salys to me they are richor poor the car they drive or lease is usually a good measure to the truth.

I would be more interested in carsales, mobile phone sales, holidays etc..taken in China over the last two years.

Peter 147