At the stock market bottom, nobody is a buyer.
It never changes...
Even the folks that like to call themselves contrarians aren't buying. They're either chicken... or they're short on money.
Two brilliant investors spoke at a conference hosted by DailyWealth publisher Stansberry & Associates in Hong Kong this week. These investors are both true contrarians – they're buying!
Peter Churchouse said Asia has never been cheaper in his career – and his career has spanned three decades. He was Morgan Stanley's Asia expert for a long time. Peter said history shows that once stocks get this cheap, the median return in Asia is 42% over three years.
Hedge-fund manager Rahul Saraogi echoed his thoughts. We have "crisis valuations without a crisis," he told the conference crowd.
I talked to Rahul on the phone yesterday. He told me about one stock he's buying that's trading at one times earnings. And another that is trading at an 80% discount to the cash it has in the bank.
When in the world can you buy cash in the bank at 20 cents on the dollar? When can you buy stocks at one times earnings? Only when you're a true contrarian.
You see, American-educated Rahul manages an India hedge fund. Of course, India was in the news last week for the terrorists that took over the Taj Hotel. Interestingly, the stock market is actually up since then – over 200 points as of yesterday's close.
How could the stock market be up? "If this had happened while foreign money was flying in, it probably would have had an effect. But there's no foreign money flying in now. It's not affecting India. We are a free country. These things can and will happen in free countries," said Rahul.
He explained further... "There's nobody left to sell. It's easy to quote Rothschild, and say 'Buy when there's blood in the streets'... but few people actually do it. Meanwhile, it's business as usual in India. As you said, Steve, the stock market is up since this happened. Values are absolutely phenomenal now."
Still, nobody is stepping up to the plate... Rahul offered to take the conference-goers on a tour of the fantastic opportunities in Southeast India (the opposite side of India from Mumbai). I was there with him a few months ago. The opportunities are ridiculous. He made the offer before the troubles at the Taj Hotel. Even then, he got very little interest.
I can't believe it, but it's true. Things don't change. When Asia is the cheapest it's been in history, everyone stares at their shoes. Then, once it's up 100% in a year, everyone wants in.
The time to buy is when everyone is staring at their shoes... not when they're clamoring to buy stocks. Right now is the time to invest along with Rahul and Peter.
Instead, what we're seeing are more chickens than true contrarians. I think very few people at the conference took the next step and invested with Rahul and Peter. Soon, I will have more of my wealth tied up in stocks than I ever have – and I'll definitely have some of it with great investors like Rahul and Peter.
I intend to be a true contrarian here. I'm buying, particularly once the uptrends begin.
Good investing,
Steve
