Contrarian Investing? Lions Coach Shows the Way
It may be Tuesday, but a lot of us are still recovering from a momentous weekend for British sport.
Great to see the now British - rather than Scottish - Andy Murray lift the Wimbledon trophy, but for me the highlight was the British Lions stuffing it to the Wallabies.
The latter was all the better for seeing the so-called experts who vilified the Lions' team selection proved so utterly wrong. Reminds me a lot of the herd mentality in these markets these days.
For those of you who missed it, the Lions won their first test series since the last millennium on Saturday.
They did this despite coach Warren Gatland dropping the demi-god (or is that demi-BOD?) Brian O'Driscoll.
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Pre-match, Gatland was roundly set upon by legions of experts who said it was incomprehensible to try and win the deciding test without BOD.
Well, after thrashing the Aussies, it just goes to show that taking a contrary view from the mainstream can be a very profitable strategy.
You don't need me to tell you there are very few real innovators and genuine contrarians in the financial markets. The Warren Gatlands of equities are few and far between this year, especially in the fund management industry.
Too many market "professionals" continue to buy on blue and sell on red. Don't believe me? Well, have a look at the data showing which fund managers have outperformed benchmarks such as the S&P and FTSE 100 this year. Not too many, I can tell you.
And what a merry dance they are being led over how to trade the "great taper," stateside. For those following the data, it's a nightmare.
Do you buy bad data as it means more quantitative easing or do you sell it as it means the underlying economy is going to hurt the corporates?
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And the same problem exists on the inverse for good data. For those impartial observers, such as smug TV anchors, trying to interpret their trading decisions, it's quite calamitous to watch.
There's a lot of "career trades" out there this second half it seems.
And surely too many money allocators who whooped with joy at the Bank of England and European Central Bank (ECB) "forward guidance" got overexcited once again?
I mean, by all means buy the market if you think it's too cheap and offers good value, but buying on ECB guidance? Do me a favor: it means nothing.
Forward guidance on rates eighteen months out as a reason to buy stocks? Nice one for the herd to jump over each other about, but pretty meaningless for how companies in the real world are going to go about selling their wares and - for that matter - how they are going to fund themselves.
Still, if the herd - sorry "momentum" - style money allocators think they are on to a good thing, then good luck to them.
I'm just not sure I see the point of giving them my money to do what any ETF tracker could do. If I give my money to a manager, let them be a Warren Gatland.
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