How Contrarians Can Beat the Bear
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Editor’s Note: General Motors is back in the 50s, at least in terms of its share price. The Dow Jones is in a bear market. Starbucks is downsizing its US presence. But Justice Litle says contrarian investors shouldn’t fear the doom-and-gloom economic news. There is always a bull market hiding somewhere among the bears. Finding it is what makes a great contrarian investor…
Beating the Bear
By Justice Litle
And so without further ado, let’s look back on the higlights, lowlights and oddball surprises of this holiday shortened week…
Welcome to the bear market. It’s now official, says the Wall Street Journal: “Stocks fizzled [yesterday], ending in bear-market territory for the first time in more than 5-1/2 years as oil jumped and fears about the financial health of General Motors (NYSE:GM) mounted.”
This is bad news for all “buy and hold” investors whose best hope for a happy ending is retiring on a market upswing. For those of us who know markets can go down as well as up — and who aren’t afraid to buck convention – there are plenty of ways to “beat the bear.” And remember, too, that no matter how bad the headline indexes get, that time-tested old adage still holds: There’s always a bull market somewhere.
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By the why, look who else has been grizzly-bit. None other than the great one himself, Warren Buffett, is struggling. According to Bloomberg data, Berkshire Hathaway (NYSE:BRK.A) is now down 20% from December of last year — the official threshold for bear territory. It’s Berk’s worst first half since 1990.
No one need shed a tear for Buffett, though. Chances are, he and his investors will come through this just fine.
What to make of the news from Starbucks (NASDAQ:SBUX)? The relentless expansion of the Seattle coffee chain was once a potent symbol of American consumer might; an old article from The Onion caught the zeitgeist with a mock headline that read, “New Starbucks Opens in Rest Room of Existing Starbucks.”
But that was then, this is now. Here in 2008, the mighty SBUX is closing 600 stores and laying off as many as 12,000 employees. “Perhaps this is a sign of the apocalypse,” your humble editor mused. “Or better yet, make that a venti chai nonfat triple mochocalypse.”
Irwin Greenstein, our emerging markets blogger, thinks the news just highlights where the growth is… outside the USA. “The company operates in about 45 countries,” he observes, “and is still expanding its presence in most of them. They can’t all be in Europe.”
Speaking of oil not going down… good grief. Light sweet crude was headed straight for the $150 mark at last blush, even as SUV sales fall off a cliff and US consumers lay off the gas pedal for the first time. A little over a month ago, we noted that the gold-to-oil ratio was at an extreme low point. You can read that piece here: Checking in on the Gold-to-Oil Ratio. We further noted that, given the course of events, it was much more likely for gold to move higher than oil to move lower. Guess what happened? (Hint: gold and oil have both gone up substantially since then.)
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Special Victims Unit: Fed and Treasury division? After the big Bear Stearns mess, Treasury Secretary Hank Paulson wants to set up some kind of task force to handle big investment bank collapses in future. Details are still thin on the ground, but the plan sounds nutty whatever it is. The WSJ reports, “among the ideas being floated are establishing a special “SWAT” team within the government to help dispose of assets…
And finally, if you want a way to REALLY beat the bear, there’s hardly a better way to do it than this… one of the best traders I know is about to make a lot of people VERY excited by unveiling his long awaited service, IPO Confidential. That’s right… I’m talking about the one, the only, the man himself, Cash McDash.
In case you just got here, Cash McDash is the pseudonym for a very real (and very successful) hedge fund trader who focuses on the IPO and new issues market. I’ve known Cash for many years, and for the past few months we’ve been doing a back and forth each week in these pages.
Over the past few months, Cash has shared a number of winning trades with Taipan Daily readers. (Here is just one example of many.) Now we’re pulling back the curtain even more, and allowing a select group of readers to enter Cash’s world via IPO Confidential. So keep your eyes peeled for that… and when you get a chance to sign up, I’d recommend being quick about it. We don’t know how fast this thing is going to fill up, and the exclusive nature of the picks means they can’t be broadcast to everyone.
Source: Beating the Bear
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Tags: bear market, BRK.A, Crude Oil Prices, Gm, Gold Prices, investing in gold, Justice Litle, SBUX, US stocksAbout the Author
Justice Litle, Executive Editor for the Taipan Publishing Group and of the Free E-letter, Taipan Daily, has a unique background that has served him well in the markets. Originally pursuing a PhD and a life in academia, his career path changed forever after discovering The Investment Biker, Jim Rogers chronicle of macro investing by way of motorcycle.
Taipan Daily is your free resource for late-breaking investment opportunities to help you beat Wall Street to the profits. Filled with investment analysis and insight from every sector. Taipan Daily delivers just the right blend of safe opportunities with the fast-moving plays, so you have an insider's edge over Wall Street and other investors.