Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Trader: Market Complacency Hints at Coming Sell-off


It's time for my very first conversation of 2012 with contrarian investor Matt Gohd of Revere Capital.

Gohd thinks the market is now in an elevated state of complacency. Expectations for volatility is low, short interest is way down.

"We're probably looking at another sharp sell-off," Gohd says.

Keep in mind that Gohd is a contrarian trader who often takes positions that other investors and analysts would reject.

The last time we spoke, back in December, Gohd was saying that the market would probably rally. It's up around 4 percent since then. When we spoke before that, at the end of October, Gohd predicted the sell-off that would hit that very day and last through November.

So how's Gohd trading this market?

"My favorite short is Caterpillar, which has been up on expected growth in China," he says.

Gold could also be in for another round of selling as the dollar strengthens and interest rates firm a bit.

Is it all bad news? Nope. Gohd has a couple of long picks as well.

"On the long side I am looking at community banks, and Google," he says.

Really? Google? Isn't investing in everyone's favorite tech company a bit non-contrarian?

Gohd thinks Google, which is trading just about $668 a share, up 3.4 percent in 2012, can rise to over $800.

Again, let me remind readers, this is one trader's point of view. I think Gohd is particularly interesting because he is always trying to figure out which way everyone thinks the market will go next, and then trade against it. But that doesn't mean he'll always be right.

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