Gallea has codified a series of contrarian trading rules that focus on increasing returns while attempting to avoid risk. Gallea and Patalon describe a solid investment discipline backed by years of research Anthony M. Gallea,William Patalon. Caractéristiques. Auteur: Anthony M. Gallea & William Patalon III Titre original: Contrarian Investing Publication: Editeur: New York Institute of Finance. Anthony M. Gallea is the author of Contrarian Investing ( avg rating, 24 ratings, 3 reviews, published ), Bulls Make Money, Bears Make Money, Pig.
|Published (Last):||16 October 2009|
|PDF File Size:||11.63 Mb|
|ePub File Size:||4.92 Mb|
|Price:||Free* [*Free Regsitration Required]|
Developing an independent, disciplined thought process is invaluable. And, they’ve done it in a knvesting accessible to most readers. Contrarian Investing offers a wealth of resources to use. He has written numerous articles and is the author of the Lump Sum Advisor. He periodically teaches finance at Columbia University and appears regularly in both print and electronic media. He is the author of the national bestseller Investment Biker.
In the price of a barrel of oil had cohtrarian alarmingly and long lines of frustrated American motorists sat fuming at every gas pump.
Interest rates had risen alarmingly, and investors were hysterical over high inflation and labor unrest. There was a sense that the United States was slipping as a world power and that shortages in all sorts of goods were permanent–that the world was running out of everything. The stock market had been stagnant for years, and now it was clearly why. It was true that for a while in the s the supply of oil was smaller than the demand, but with the rise in prices had come the inevitable rise in production.
There were more drilling rigs, more money pouring into holes in the ground under the Gulf of Mexico, the North Sea, and South America, and more young people going into geology. Yet inwhile the popular press might not have gotten it right, the petroleum trade journals were clear: Rising prices has brought out enough oil to exceed the demand. Supply continued to increase, and yet the price was still rising, fueled by a media hysteria. This led to inventory building and hording.
Consumers turned down their thermostats and bought sweaters. They bought smaller, more efficient cars and household appliances–changes in the public consciousness that would push down demand and hold it down for years to come. It made a thoughtful person wonder what was going on. The iron law of supply and demand makes perfect common sense: If there is more of an item for sale than there are buyers, the price goes down.
If there is less, the price goes up. There may be time lags, but it has always held true. If, say, the stock market is at new heights, there are co-op apartments for sale in Manhattan and 2, Wall Street yuppie buyers ready, willing, and able to buy one, then co-op prices will go up.
If the stock market has crashed and only yuppies want those co-ops, the m.galea will fall. Not even a Marxist economist will debate this conclusion.
In fact, the thoughtful investor would read the newspapers and absorb what television reports had to say, and come to the conclusion that he should buy or sell the oil or the co-op. He would invexting need fancy charts or an MBA or economic advisors.
He would think for himself, and gauge his timing on the extremes he found in public thinking. This oil panic seemed strange to me. I thought back to a visit I had made to a Tulsa drilling rig company in During the s and s, Tulsa had been the oil rig capital of the world and, since in I was bullish on oil, I had in mind investing in oil rigs, a “pick and pan” strategy.
That is, rather than betting on prospectors’ finding gold, I would invest in the less risky business od antyony pick-axes and sluicing pans to prospectors. In this case, I would invest in the rigs needed by those who where going to drill for oil. The chairman of the oil rig company told me, “Oh Lord, Jim, I know I should not say it, since we need all the support we can get, but you seem like a nice young fellow, even if you are from New York. Don’t buy our stock.
It would be a big mistake. If only I weren’t 55 years old but 28, I’d get out of this business in a minute. I’d start over in anything rather than oil. Drilling is a dying business. It was enough to make a jnvesting investor do some hard thinking. In everybody with any sense wanted out of the oil business, and in everybody with any sense wanted to be in it–and both were utterly wrong.
By the mid s the bottom had dropped out of the price of oil once more.
Contrarian Investing : Buy and Sell When Others Won’t and Make Money Doing it
Well, one thing he can do is learn to listen m.galela the popular press with an ear tuned for these extremes. At market tops, the refrain will run, “This time it’s different from all other times. Trees will continue to grow and grow and grow. Buy yourself a tree and watch it reach 50 feet, feet, a thousand feet. This is an investment you put money in and forget.
At market bottoms, the song will go as we can now hear in the melody for lead, the metal, which has become a pariah”We’ve lost our chief markets, paint and gasoline.
Lead is a poison and kills people. Prices are severely depressed.
Every company with any sense is getting out of lead. It has anthoyn a marginal future. At this point everybody in the investment world “knows” that lead is dead. But the savvy investor always examines the other side of what everybody knows. Am I telling you to buy a lead mine? Not necessarily, but you might consider the use of lead in batteries, which continues unabated. The world press tells me the sale of cars and motorscooters to the Chinese, Indians, and other developing countries is growing steadily; won’t every car and scooter need a battery?
Anthony M. Gallea (Author of Contrarian Investing)
Another example of what everyone “knows,” and what could be a current bottom, is the producion of tea. Prices are down over a year period. Tea plantations have been plowed under to make way for palm oil, rubber, and soybean production. I am bullish on tea: But, when I chatted with the chairman of a major tea company recently, he told me he was selling off his tea assets.
Tea is so low now it has to come back. If enough companies sell contrzrian their tea assets, their loss can be the shrewd investor’s gain.
It is an old story in the stock market. Today’s news articles trumpet the stock market as the ideal place to increase wealth long term, that nowhere else can parents provide so well for their children’s college educations. And it is so easy, too.
Contrarian Investing : Anthony M. Gallea :
Put your nest egg in a mutual fund company, and it will do all the work. This is when my mother calls and asks what mutual fund she should invest in. When I tell her none, she becomes exasperated. You’re supposed anthny buy stocks before they go up, not after. She is right about the market rising. The Dow Jones conhrarian today is around 8, but 15 to 20 years ago when the index was investiing 1, and there were only mutual funds, the newspapers put it: They sell when the magazine declares something is a good investment and buy on the “something-is-dead” covers.
In all markets, supply and demand are constantly rising and falling, hurtling from one extreme to the other. To an investor with the righgt ear and eye, fortunes are waiting to be made. Does it take work?
It became hard to give away real estate there. Texans invented the phrase “see-through buildings” for partially completed buildings without tenants or the prospects of tenants. Predictions were as gloomy as you can imagine: Texas had enough real estate to last it for the next two or three decades.
Well, that turned out to be the time to buy. Today, buildings are again being erected in Texas. Those who bought buildings there for a few dollars a square foot are able to sell them for ten and twenty times as much.
There is an old adage in investment lore that says, “Buy when blood is in the streets. An investor did not have to buy during the riots in the streets of Whatts; a year later was time enough to catch the lowest prices and make a fortune.
The lesson here is that timing is important. You can be right–but early–and suffer badly. The other pitfall of buying after the bottom is to sell your position too soon. The best way is to buy once the move is underway, and sell before the top.
When no less an investor than Baron Rotschild was asked how to get rich, he responded that he always sold too soon. Long-term tops and bottoms are m.allea in that they usually go to extremes.
In a bear-market panic driven by fear, as well as a bull mania driven by greed, the mob almost always goes too far. The wise investor expects such a run, gets out too soon, and is better off.
So, the all-important questions become contrarjan to buy and when to sell. Note, howener, that all major market bottoms are alike, whether they are in the corn, stock, or real estate markets. The same is true for tops. Pick any previous top or bottom, anywhere, any time, from the beginning of time until now.