The Real Reasons to Engage in Contrarian Investing

In this article, I’ll cover the real reasons to engage in contrarian investing. I’ve often heard contrarians state that just by going against the consensus in the investment world, you will be right more often than wrong because the herd is wrong most of the time. And this has been a hot point of debate for why one should engage in contrarian investing. While this might be true, in it of itself, this is not a valid reason to be a contrarian. For example, what happens when the mob is right? Then contrarian for the sake of being contrarian would yield horrible results. The reason to be a contrarian is because the overwhelming majority of evidence points to an outcome that is different from the consensus take. Taking a contrarian public stance is difficult enough for the mob will belittle you for such a stance so ensuring that a contrarian stance is backed by facts, not emotions, must be the reason behind taking a contrarian stance.

For example, in my new substack newsletter, I’ve taken many contrarian investing stances for which the mob has disparaged my take, starting with this article in which I warned the #AMCApes that AMC was not going to break higher in price despite their refusal to sell:

“the run of the #AMCApes appears that it may be closer to the end than to another massive short squeeze higher at this current time on 9 November 2021. And if a break to the downside happens, which appears more likely than not…a decline to the 200dma would be within the realm of the immediate decline.”

So, despite a few #AMCApes mocking my take as horribly wrong, and AMC share price rising marginally higher to $42.50 a share after my published prediction, indeed, AMC immediately declined to not only its 200 dma as predicted, but lost more than 50% in share price and descended to a low of $20.80 a share barely more than a month after my prediction. However, I was not just contrarian for the sake of being contrarian, as I explained in my article:

AMC CEO Adam Aron, has been slow to move AMC’s business model from its dinosaur theatrical model that Covid lockdowns practically killed during the majority of 2020 and 2021. Thus far, Aron has only instituted minor changes, such as allowing the consumer to purchase AMC theatrical releases on Premium Video On Demand (PVOD) on an expedited 17-day after theatrical release timeline versus the prior 90-day model. In my opinion, Aron should have been burning the midnight oil to make radical changes in AMC’s operational model to quickly adapt in response to the devastation of Covid Lockdown measures within months after being handed a lifeline by the #AMCApes way back in January of 2020. It should not have taken nearly a year to announce that major operational changes are on the way.”

That was the reason behind my predicted tank in the AMC stock price despite #AMCApes holding or doubling down every time AMC stock lost another 15% in share price. And even now, despite the rebound from $20.80 to its current $28.52 share price, I believe that next year holds lower lows for AMC stock.

Another contrarian investing take I provided earlier this year (but this time privately to my patrons only) in cryptos (my public takes on crypto are available here and on my substack platform) outside of BTC and ETH was that MM coin would crash to $1 per coin from its then price of $76 per coin by 31 October 2021. While this did not happen, as timeframes of big crashes are notoriously difficult to predict, MM coin did lose 78% of its price within my predicted time frame. When my predicted price did not come true, I amended my prediction of a $1MM price by the end of Q1 2022, and as of today, MM coin has lost 83.5% of its price since my prediction. Again, despite the fan boys that flocked to buy MM coin upon its launch based upon emotional appeal and not facts, a herd behavior that pumped MM coin to a high of a couple hundred dollars per coin, the facts, not speculation, leaned heavily towards my contrarian prediction coming true. And even though I only provided my sell guidance on BTC at $66,000 in early November to my patrons, I provided a later warning to everyone on my substack newsletter when BTC rebounded to $60,000, that getting out at $60,000 was still a wise move if one had not sold at $66,000 in this article titled “For Better Results, Trade BTC, Don’t HODL, and Discount the Opinion of the Mob.”

So, publicly, I provided a second chance to BTC HODLers to get out and do the right thing at $60k, despite the same BTC propagandists lauding the recent bump to $51k as an early Christmas group to all BTC owners. Really? So HODLing and possessing BTC at $51k would have been a better outcome than selling at $66k or even $60k as of today? Again, my contrarian view that it was time to sell BTC at $66k, as was my view that it was time to sell BTC at $58k this past April and not buy again until July when BTC dropped below $30k, was not based upon any wild speculation but simply based upon my analysis of the ongoing behavior exhibited in BTC derivatives markets. And even now, despite BTC’s rebound off of $45,500 or so a few days ago, I’m still not seeing a low-risk, high-reward environment for BTC to buy BTC at this price. Perhaps this may develop after a few more days or weeks of trading, but not yet.

Finally, with the return of the transitory inflation narrative, fueled by a recent interview with Jim Rickards, who opined that gold and silver prices would continue to possibly struggle in 2022 due to transitory and low inflation rates, I hope most people realize that Jim Rickards incessantly quotes “official” BLS inflation statistics as if they were real, when any educated person understands that “official” BLS inflation statistics underreport real inflation rates by multiple factors. This has not been a new development, but has been the reality for decades. So if gold/silver prices continue to trade within a range next year, it certainly will NOT be due to the false propaganda transitory inflation narrative, but simply due to more manipulative banking cartel shenanigans in futures markets. I voiced my fact-based, anti-fantasy inflation narrative opinion on my substack newsletter more than a month ago in this article titled “The One Chart to End All the Clownspeak of ‘Transitory’ Inflation”, that indisputably exposed, with facts, that any attempt to revive the “transitory inflation” narrative in the future would be pure propaganda. In this case, my contrarian investing take can indisputably be proven to be fact without question. In fact, I further updated that now, more-than-a-month-old opinion just this week on my substack platform with a podcast titled, “The Little Understood Psychological Game of Banker Asset Price Rigging” to explain why I believe Jim Rickard’s call on gold and silver prices in 2022 will be horribly wrong.

Having worked for a Wall Street firm over a decade ago before walking away from the industry in disgust, I observed how brokerage firms would use HFT algos to hunt automatically executable stops to chase retail investors out of positions right before such positions would increase dramatically in price. In fact my patrons completely understand the truth of this little known fact because they just witnessed this week, many positions we just recently entered . of which they would have been closed out with the use of automatically executable stops. But since I specifically warned not to use hard stop losses and to only close out positions if they closed below certain prices at market close, we were all able to remain in positions from which we would have been closed out with the use of hard stop losses. Consequently, at the current time, instead of being stopped out of numerous positions that we had just entered at losses, we remain profitable in nearly all positions with much higher upside price appreciation likely ahead in the coming weeks and months. Thus, in the contrarian game, inside knowledge of how asset pricing mechanisms really work versus the useless knowledge gained inside MBA programs is also necessary to make right decisions that keep you in the game when you should stay in it and lead you to exit when you should exit.

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J. Kim

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