Listen to this article
My favourite word as a kid was “antidisestablishmentarianism”, which I thought was the longest word in the English language. At the time I thought it referred to some biology thing, such as a disease. But its meaning boils down to “the people against the people against the government” and perhaps it was first used by Henry VIII to refer to those who were against him for wanting to break away from the Catholic Church. I have to coin a new word now, which refers to me: antidisestablishmentcontrarianism. Don’t try to disassemble it with the prefixes and suffixes. I’ll tell you what it means because I coined it. It means the people against the people against the markets. In other words, I hate people who consider themselves contrarian investors.
Think about it. You hate them, too. They are on television, in newspapers and finance websites, they call you up with their smug advice. “I make my money going against the crowds,” they say. As if they are above the mindless masses, the one-eyed cyclopses running amok in mad mobs all over Wall Street. To be a contrarian investor, you have to assume people are stupid. You also have to assume that the masses, in general, lose money. Furthermore, you have to assume that you have the ability to rise up above this state of retardation and be a beacon of intelligence that knows more than everyone else.
The thing about contrarian investors, though, is that they are insecure. They want to point out that they are contrarian.
The reality is the masses are usually right. Let’s say you were a contrarian on internet stocks. Well the masses were buying internet stocks in 1995. If you were a contrarian, you would’ve been wiped out five times over or more every time you dived in. Heck, even if you were a so-called contrarian in January 2000, you probably would’ve been wiped out by February when most internet high-flyers had their last surge. No problem, contrarian pundits now say, “I was a little early then. No big deal. Just like I am now.”
And here’s how contrarians continue: Americans are leveraged to the hilt; 80 per cent have given up their potential for a “rainy day”; they are going to lose their homes and cars, and their credit cards will get cancelled when they can’t pay. Retailers will suffer first, because everyone who has been borrowing against their future will stop buying goods. America is on a great downswing that will last over the next century as inflation skyrockets and tens of millions of jobs are lost.
Well, the death knell for America has been rung many times over and the investment graveyards are scattered with the tombstones of the brave contrarians who bet against the US economy since the Great Depression (quick: what’s the best market year ever? In 1933, in the middle of the Depression, with 20 per cent unemployment, the market rose 100 per cent). When inflation and interest rates were soaring in the early 1980s and everyone was stuffing their silver into their mattresses, the US markets were on their way to 1,000 per cent gains over the next 20 years.
So please ignore the geniuses and join the clan of antidisestablishmentcontrarianism. Let’s look at some fun stocks to buy that the contrarians are bashing. They don’t like Metlife, the insurance company, because of potential exposure to subprime debt. Whatever. blah blah blah. It increased guidance and said, “Oh by the way, our stock is so cheap we’re going to buy back a few billion dollars’ worth.” The company trades at only seven times cash flows and just about every great mutual fund and hedge fund out there is a shareholder. So go ahead, be contrarian.
Oh! How about Dell? I thought the world’s second-biggest PC maker was going to disappear because everyone is now buying laptops and all the banks have stopped buying computers because they are all bankrupt? Well how about their 27 per cent increase in earnings plus their new $10bn buyback programme? The stock is 20 per cent off recent highs, so let’s get in at a discount to all the people who bought recently, including superstars such as Moore Capital and value guru (the “other oracle of Omaha”) Wally Weitz. Go antidisestablishmentcontrarianismers!
Ok, my rant is over. But in the course of doing this column I researched for your benefit the longest word in the English language. It is biology-related but I’m not sure what it means: Pneumonoultramicroscopicsilicovolcanoconiosis. Forty-five letters. Knock yourself out.