8/3/2019 Sharing Wisdom (21 Feb 2012)
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Whatmightacontrariandonow?
20Feb2012
TheBusinessTimes
ByRSivanithy,SeniorCorrespondent
2012SingaporePressHoldingsLimited
FOUR weeks ago, this column suggested that contrarians had the
market in their grip,
particularly in Europe where stocks were turning in a stellar
performance despite terrible
economics('Contrariansholdsway-fornow'BT,Jan16).
Itwasalsolatersuggestedthatbecauseliquiditywashighandasfundmanagerswerefearful
aboutmissingout,stockswouldremainwellsupported,thoughinvestorsshouldbearinmind
thatEurope'sdebtmesswasfarfrombeingresolved.('Ampleliquidityshouldprovidesupport',
BT,30Jan).
Sincethen,thecontrarianstanceofbeingbullishin
thefaceofaweakeconomicoutlookhas
becomethenorm,withanincreasingnumberofinvestorsbuyingintotheideathatEuropewill
somehow muddle through its debt crisis - that enough money will
be raised and belts
tightened,suchthatthingsprobablycan'tgetanyworsethantheywereattheendof2011.
DittofortheUS,wheretherehavebeensignsthattheeconomyhasbottomed.Inotherwords,
ifDecember2011representedthebottom,thentheonlydirectiongoingforwardmustbeup-
orsothethinkinggoes.Thisargumentisnowbeingusedtojustifytakingtheplungeand
itis
todaycommonplaceamongmanyinvestors.
Whichthenbegsthequestion:ifeveryonebelievesthemarketwillcontinuerising,whatmight
bethecorrectcontrarianplaynow?Mightitperhapsmakesensetoquietlytakesomemoney
offthetable,especiallysincewe'renowseeinghecticchurningofstocksbelow0.5cent,which
suggeststhingsaregettingabitoverheated?
Thereis,ofcourse,stillampleliquiditytoprovidesomesupport.Somaybethepreferredoption
would be to buy on the dips and to sell into strength. And
although the market and the
economyoftendiverge, itwouldbewise tokeep a close eyeon
Greece,wheredespite the
marketbelievingtheworstisover,thingscouldyettakeaturnfortheworse.
Lastweek,theNewYorkTimesreportedthatPortugalisnotrecovering,despitehavingdone
everythingtheEuropeanUnionandtheIMFasked.The78billioneuropayoutlastMayalsodid
nothelp.Instead,Portugalissinkingdeeper.Whenitreceivedthebailout,Portugal'sdebt/GDP
ratiowas107percent.Ithassincegrowntoanestimated118percent.
