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Hudarios (< 20)

Where will the bottom be? NOT Dow 5000.

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March 11, 2009 – Comments (13) | RELATED TICKERS: SPY , IVV , VTI

I just did Google searches on “Dow 6000,” “Dow 5000,” and “Dow 4000,” and 5000 has about twice as many returns as either of the other two, so that seems to be the most common forecast right now.

The reason contrarian investing works is because the actions of the majority tend to work against their predictions. Presumably, all of the people who believe any one of these forecasts (4000, 5000, 6000) have already made their decision to either (1) cash out now and wait for the bottom, or (2) stay in stocks the whole way and tough out the temporary losses. In other words, these prognosticators won’t be doing any more selling between here and their targets, and therefore won’t be causing any near-term price declines. That means that either the bottom is already here, in which case all of these forecasts are wrong, or that any losses going forward from here will be due to other investors changing their minds, cashing out of stock positions, and creating their own set of bottom forecasts.  Eventually, so many people will be cashed out and forecasting further drops that there will be too few sellers left to cause any more price declines.  That will mark the bottom of the market, and the rally that follows will leave a huge group of incorrect bearish forecasts in its wake.

13 Comments – Post Your Own

#1) On March 11, 2009 at 2:57 PM, Paxtor (28.91) wrote:

haha, you base your investments on Google search results?

 

Not a bad idea

"buy kraft" gets about 15,000 results whereas

"buy enron" gets almost 7000 

The CONTRARIAN in me says I should buy Enron, but I can't find the ticker.

 However, "jean claude van damme action pyjamas" gets NO results! I'd be a REAL contrarian if invested everything in those.

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#2) On March 11, 2009 at 3:03 PM, IBDvalueinvestin (99.68) wrote:

I already said bottom is at 4900 DJIA which would be a -65% drop from 14,000 high.

 or 

When there is Riots in the Streets demanding that the food be given out to homeless families for free.

5 Million lost jobs already and still rising at a 640K clip 

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#3) On March 11, 2009 at 3:10 PM, Hudarios (< 20) wrote:

Paxtor,

Contrarian investing is about timing and price levels a given security (or market) that actually exists, not a way to chose which company to invest in.  Otherwise one would have to conclude that driving off a cliff is a good idea because most people don't want to.

What prompted me to write this was a sudden rush of Dow 5000 forecasts on several websites. Rather than link to every article, I thought it would be more concise and more complete to let google gather the evidence. If you have a better sense of where the most popular forecast is, we're all ears.

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#4) On March 11, 2009 at 3:54 PM, Paxtor (28.91) wrote:

Hmmmm, a better forecast...  Yahoo! maybe? Ask Jeeves? 

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#5) On March 11, 2009 at 4:30 PM, alstry (35.33) wrote:

CAN ANYONE SAY DOW 1000????????

U.S. Feb. individual income tax receipts at 24-year low

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#6) On March 11, 2009 at 4:58 PM, FoolishChemist (96.98) wrote:

Dow 5000 - 5.74 million

Dow 0 - 34 million

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#7) On March 11, 2009 at 5:55 PM, Paxtor (28.91) wrote:

dow + batman only got 500 K on google, so we can rule that one out

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#8) On March 11, 2009 at 9:37 PM, biotechmgr (35.37) wrote:

This is actually an instructive study as contrarian investors like me look for signals mass psychology and mood. Not as far fetched as some here would believe. This is just another facet of the simple "buy when blood in the street".

Whatever the popular prediction is, it is certain to not come true.

Was it Mark Twain who said, when you find yourself in the majority, it's time to switch sides? An implicit tenet of contrarian investing.

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#9) On March 11, 2009 at 9:46 PM, Hudarios (< 20) wrote:

Hmmm... Bruce Wayne is a wealthy industrialist. You may be on to something there.  While we're on the subject of using comic book millionaires to predict the stock market, we might as well include Lex Luthor.

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#10) On March 11, 2009 at 9:57 PM, Hudarios (< 20) wrote:

Well said, biotech.

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#11) On March 12, 2009 at 10:05 AM, EHoyle80 (< 20) wrote:

Recession or end of the world as we have known it? John Silvia, Wachovia’s chief economist, thinks the latter. (See here) “These jobs aren’t coming back. A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations.”

Via Stock Research Portal

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#12) On May 07, 2009 at 8:32 AM, Collin757 (< 20) wrote:

Hodarius I'm right behind you in Coldest 7-day player, we are the elite CAPS tankers right now.

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#13) On March 15, 2010 at 2:05 AM, checklist34 (99.71) wrote:

I won that day

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