Comments on: You Are Neither Right Nor Wrong Because The Crowd Disagrees With You

By: Jim Allen

Jim Allen — Sun, 26 Sep 2010 02:26:37 +0000

This is a misunderstanding of Graham’s teachings. Graham wasn’t a contrarian. Graham merely looked to see if you were getting a dollar’s worth for a dollar paid, with an adequate margin for error.

It has been two years since this article, and depending on which financial stocks you invested in, your results might be quite satisfactory, or extremely hideous. If you bought Bank of America or Wells Fargo, it might be OK. If you bought WAMU, or Wachovia, or one of the failed Wall Street “bankers”, your “mileage may have varied!”

But a true Graham devotee would have bought none of them. Not enough value, assets, too much leverage. One of the country’s best known professional “value investors” went down this path and it almost ruined his career. Another huge private manager, a former enthusiastic devotee of Professor Graham, went heavily into autos, contrarian to the max, with disastrous results.

We’re not contrarians, we’re value seekers! Those are not necessarily the same.

By: Curt

Curt — Tue, 24 Jun 2008 19:23:32 +0000

Great post, but I still don’t feel good about investing in the financial sector of the market for several years. Time gets more important as you get older. Sometimes, you cannot say, ‘I will just wait 10 years for my stock value to return’. The other problem is borrowed money, because as the economy goes down, many people are forces to sell because the money they invested is not their own and they need to pay it back. Borrowed money can run counter to reason in the market. The fear that is spreading in the market is based on fundamental weakness. The US stock market is no longer a good investment as inflation is eliminating the rewords of owning US stocks.

Investors like to talk about how everything will be ok and stock prices will return, because if they don’t then they are out of a job as people move their money into other things. I think the economy is going to shed a million more investor jobs before the party is over. Get out while you still can.