By Andrey Dashkov, analyst, Casey Research
Here at the Dispatch, we’re contrarians. We make money by going against the mainstream.
That’s the way of the few. But it’s how we get our edge.
Because plenty of investors not only read mainstream financial analysis… they follow it. They put the bulk of their money into stocks featured in major financial outlets because they trust those sources.
Now, make no mistake. Some of those outlets are great sources of information. In fact, some of the newspapers and journals I read on a daily basis are considered mainstream, like Financial Times or The Wall Street Journal…
But that’s not what I base my analysis on. And it’s not how you should make investing decisions.
They may be good sources for facts and reporting… But not conclusions. And definitely not information that would give you an edge over the rest of the investment world.
Let me give you an example.
Listening to the Mainstream Could Cost You
In July 2008, WTI crude oil was trading at an all-time high of around $145 per barrel.
A couple of months before that, a team of analysts at Goldman Sachs saw oil shooting higher, and predicted that it would eventually hit $200.
Given the clout of Goldman Sachs – a multinational investment bank worth over $100 billion at the time – it’s safe to assume some investors listened and bought oil futures at their recommendation.
But what happened next came as a surprise.
The Great Recession happened. By February 2009, at the height of the crash, the price of oil plunged 77% to around $34. Those who bought in at Goldman’s forecast would have lost over half of their investment, if not more.
Now, I’m not here to talk about oil. But this example goes to show that some of the best analysts in the world get it wrong sometimes. Especially in times of crisis. It doesn’t always pay to listen to the mainstream.
There’s a better way…
Do What Would Get You Fired
Understand what the mainstream analysis says… and then make a conclusion that would get you fired if you were on that research team.
I used this strategy in March 2020 when I said the coronavirus was still an overlooked threat… that would ultimately distort the markets. That was before the market bottomed just one week later.
And the panic bargains I put on readers’ radars outperformed the S&P 500, with some delivering as high as 76%.
I plan to use this same contrarian strategy going forward. And I’d urge you to do the same.
The oil example I used above is from 2008. It happened during one of the worst market crashes in history.
And 2021 is an immensely uncertain year. I would argue that right now, the amount of uncertainty is as high as it was back in 2020, as the COVID crisis unfolded. In fact, the CBOE volatility index, the market’s “fear gauge,” is almost 80% higher as I write than it was exactly one year ago, before the pandemic.
Which means nothing’s guaranteed. And mainstream analysis or consensus won’t always steer you in the right direction.
With that in mind, let’s take a look at a mainstream market projection for 2021… and how we’ll position ourselves to make more money by betting against it.
“2021 Will Be the Year of COVID Recovery”
As I said last week, many are hopefully looking toward 2021 as a year of recovery… and stock market windfalls.
It might be the case, as we have multiple vaccines.
But we know that the virus is mutating. Two new strains were found in the UK and South Africa, forcing the UK into another lockdown. Two new strains have also been found in the U.S.
And the vaccine rollout has been slower than hoped across the world.
This means that things may get worse before any widespread vaccination.
And if more lockdowns are around the corner… local economies will suffer as businesses shut down… unemployment rises… and recovery starts to stall.
It may not be popular opinion… but I recommend treating this year as a “2020 part two”; plenty more uncertainty and volatility along the way.
I think you’ll be better off buying gold than going all-in on stocks.
Now, I’m not saying that you should sell everything you have and buy gold. But if the possibility of a rocky year becomes reality, it’ll make sense to have some gold in your portfolio to cushion the blow.
One of my favorite ways to play the metal is the SPDR Gold Trust (GLD). It’s a convenient and cheap way to get exposure to gold.
I believe this mindset will help you to look at things from a different perspective this year…. and give you an edge in your portfolio.
Analyst, Casey Research