Sunday, January 4, 2009

We're All Contrarians

One thing that bothers me quite a bit is the possibility that I'm just one of the sheep blindly believing in a stock market revival.  I read lots of newspapers, blogs, and research reports, and I realize that there's no shortage of bullish talk.  That emboldens the bears, who  say that the market can't possibly go up when so many are predicting it.

There's an old, probably apocryphal story about about a sell-side strategist who was making a speech to a group of buy-siders.  He asked for a show of hands by those who considered themselves to be contrarian investors.  Almost everyone raised his hand. 

The bearish argument is always more elegant, more reasoned, more rational.  If bulls can give you three general reasons for expecting a higher market, bears can offer ten very specific and seemingly irrefutable points to guarantee a fall.  

We're all contrarians now.  We've all learned that the path to profit is the one less traveled.  We all look to fade the consensus.  The problem is that, as everyone fades the consensus, they become the consensus.  

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