The most memorable scene in the film adaptation of Glengarry Glen Ross is when Alec Baldwin’s character—a hotshot real estate broker from the prestigious Mitch and Murray agency—tells a group of struggling real estate agents that it takes “brass balls to sell real estate.” There’s probably some truth to that, but it takes bigger cojones to buy what everyone else hates.
Jim Rodgers, Warren Buffett, and our own Doug Casey all made fortunes by going against the crowd. George Soros once made $1 billion in a single day by doing something everyone else thought was crazy: shorting the British pound when the Bank of England was aggressively propping up its currency.
Of course, being a contrarian is about much more than buying stocks with low price-to-earnings ratios or when blood is filling the streets. Impeccable timing is what really separates contrarians from the average investor.
A contrarian would never make a dime if the market never saw things from his perspective. To generate alpha, a contrarian must identify trends first—but not too early, which is the same thing as being wrong in the investment world.
That’s easier said than done. In fact, it takes a different breed to see opportunity when everyone else sees a crisis.
Sure, the life of a contrarian can be lonely, but the financial and intellectual rewards make it worthwhile. The brave voices who warned of a real estate bubble in 2006 were the laughing stock of the investment community—that is, until the market’s excesses caught up with it.
Unfortunately, there’s never been a tougher time to be a contrarian. Value, by traditional measures at least, is practically nonexistent. Central bank meddling has pushed stock and bond valuations beyond reason. And yet, the market should continue to defy odds as long as central bankers support it.
Modern–day contrarians must do more than buy unloved assets to be successful. They must understand crowd mentality; that the herd is irrational; that people overreact to bad news.
A contrarian must also keep his or her own animal spirits in check. Finally, one should develop one’s own opinions but accept that fighting the trend is often an unwinnable battle. The market has made fools of many respected investors who tried to go against the trend.
This is what Casey Research is all about. Whether it’s positioning ourselves ahead of the next money printing scheme or preparing for inflation while everyone else is obsessed with deflation, we aren’t trying to win popularity contests. We would rather make a ton of money. And our modus operandi is to look for the next game-changing trend while everyone else digests yesterday’s news.
And right now, there's no greater opportunity than the precious metals sector. Shares of the most promising companies are selling for less than book.
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