The Triumph of Contrarian Investing, Ned Davis, McGraw-Hill, 2004 - 63 pages + addendum

I'm working on a summary. In the meantime, here are a few ideas from Chapter 4

Headlines and Cover Stories is the title of Chapter 4
If you still think gurus on television and in the press know what they are talking about, this chapter will convince you experts do not know what the future holds any better than you. In fact, "The covers of weekly news and business magazines have often served as notable contrary indicators for stock prices".35
Ned Davis details a study done on Time magazine covers since the 1920s. It found that 80% of the time after a bullish or a bearish Time cover, the cover was wrong over the subsequent 11 months periods. Cover stories tend to occur, the study concluded, near points of maximum momentum on the upside or downside.
Over several pages, Davis outlines stories in various publications and puts capsules of them on four separate graphs of the Dow Jones Industrial Index: the period around 1929, the 1960s and 1970s, the 1980 and 1990s and early 1990 to late 2002. It's fascinating material to observe. Politically motivated quotations are placed on a separate graph covering the period from 1920 to 2000.
EXPERTS DON'T KNOW
My favourite example in this chapter deals with Barron's. Each year, Barron's assembles the best and brightest market professionals for an all day session in New York. In January 1973, the best market professionals were very wrong. The Barron's January 1 1973 headline was: "Not a Bear Among Them"38. The Dow stood at 1050. The experts expected at least 1200 on the Dow. "Contrarily, the market slid downhill to a calendar-year low of 788 in early December and continued further down to 577 the following year."38 The ultimate bear market low was on December 6 1974. The market did not really begin to recover until August 1982. I've always maintained your guess about the future direction of the market or the price of any stock in the short term is as good as that of any financial expert. There's a lot of proof that this belief is correct in New Davis' book.
"In summary, media covers serve the contrarian well as both a reflection of extreme sentiment and a purveyor of same. Observing this extreme sentiment and realizing its effect on liquidity only helped clarify when the turning points would occur. So while media headlines and cover stories cannot be used alone as the basis for investment decisions, they can provide a valuable real-time picture of popular sentiment and can serve as anecdotal support for other measures of stock market psychology." 43

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