Now Entering Russ's World
In November 2015, money manager John S. Tobey concluded the stock market was signaling trouble ahead and sold his market positions, going to cash.
The Forbes article describes his contrarian reasoning.
Contrarian investors look at market prospects differently than most, which is what makes them “contrary.”
When the stock market is down so far nobody sees any basis to hope it will ever to rise again, contrarians buy. They point out when everybody has already sold their shares, there is nobody left to sell more to. It has to go back up.
When stocks have risen so high into the stratosphere everybody believes they’ll hit the moon, contrarians sell. They point out when everybody is already fully invested, there’s nobody left to buy more. It has to back down.
According to Tobey, although the 2015 market failed to advance, it did manage to overcome the August-October lows. That indicates a shift in investor psychology.
Tobey describes stock investors going from the complacent optimism of the first half of 2015 to “skeptical worry” by the end of year.
The recovery late in the year did not rebuild investor confidence. They remain worried about many uncertainties, especially the declining price of oil.
Yet, despite investor worries and the many uncertainties in the world, six of the all-time high growth stocks Tobey uses for his indicator held their support levels. That proved buyers are supporting those stocks, a sign of better times to come.
James Dondero, CFA, CMA, Co-Founder and President of Highland Capital Management (HCM), has focused on high-yield and distressed investing. Founded in 1993, HCM is a pioneer in the Collateralized Loan Obligation (CLO) market. CLOs securitize multiple business loans pooled together so they can be sold as investments. This helps businesses raise more money at lower cost.
Prior to founding HCM, Jim was Chief Investment Officer for Protective Life. He helped it build out its Guaranteed Investment Certificate (GIC) subsidiary. GICs are Canadian investments similar to certificates of deposit, but paid by insurance companies.
Jim is also Chairman of Cornerstone Healthcare, CCS Medical and Nexbank.