High probabilities of profits in being a contrarian investor.📈🚧
If there is one thing that has been proven throughout the history of financial markets, it is that the consensus is wrong more often than it is right.
If it weren't so, all analysts would be rich. And obviously, that is not the case.
Most advisors and managers tend to miss the big rises. And they are usually not prepared when the big drops come.
You can count on one hand the analysts who recommended creating a liquidity reserve before the current tariff chaos occurred (to be able to buy low taking advantage of the drop).
And the positioning data in the moments leading up to big rises almost always coincides with a higher level of liquidity. It doesn't matter if they are retail investors or hedge funds.
It is enough to review the evolution of the “put - call” ratio, which measures bets against the market vs. in favor: the records of “short” positions almost always coincide with moments before big rises.
The most recent - and notable - case was in the summer of 2023.
And the most active in the derivatives market are alternative management funds. That “rare bird” of an investor, advisor, or analyst who tends to do the opposite of the majority is called a contrarian investor.
It cannot be said that they are always right, but the fact that the market consensus tends to be wrong more than right leads to the conclusion that the contrarian investor is right more than the one who systematically follows the herd.
Hence, it is interesting to consider from time to time what they would do. And then apply the common sense filter, since obviously, it is not enough to go against the grain to be right.
Let us clarify that we are not making any investment recommendation, we limit ourselves to stating what the consensus says and what we think the loose verse would do, not what we are going to do ourselves.
