So I was recently listening to an audio series about investment. This particular installment was called “Bargain Hunters, Contrarians, Cycles, and Waves.” I found out that it was actually two presentations: one about “The Bargain Hunters and Contrarians,” and one about “Cycles and Waves of the Market.” Both were as interesting as I expected them to be, and brought back fond memories of my days as a business major.
The Bargain Hunters and Contrarians
The presentation about “The Bargain Hunters and Contrarians” was mainly about the “contrarian” philosophy of investing. This philosophy gets its name from going “contrary” to the rest of the market. When the rest of the market wants to sell particular stocks (because of things like bad publicity, for example), contrarians choose these moments to buy them. When the rest of the market is in a craze to buy something, contrarians choose these moments to sell what they have in these areas. If the rest of the market thinks that “the price can't go higher” or “this stock is a real loser,” contrarians conduct themselves as if the opposite is true (and they're sometimes right). Some are contrarian by design, some by accident, and some just for the sake of being contrarian (and nothing else). The style carries some risk, as it turns out, because these market sentiments are sometimes there for a reason. But good contrarian investors can make decent money, if the rest of the market is indeed wrong about something. Some contrarian investors will even buy stock in companies that are going through bankruptcy, because they believe that the company can ultimately recover from it. But like any other style, they have to do their homework if they are to reduce their risks, and should not be contrary just for the sake of being contrary (in my not-so-humble opinion).
John Templeton, a famous investor in this style
Cycles and Waves of the Market
The other presentation was called “Cycles and Waves of the Market,” and it tried to cover the mysterious concept of the business cycle. Virtually all economists agree that there are indeed business cycles, but they disagree about why these cycles happen, and whether or not they are indeed predictable. Some believe that these cycles are ultimately uncontrollable. Others believe that you can extend the good phases, and shorten the bad phases. These proposed “cycles” range from a few weeks in duration to more than 50 years long. Some even believe in “cycles within cycles,” and claim to be able to predict them. With some of these models, it seems that one might as well consult a horoscope, because they don't actually have the predictive power that they claim to have. But most economists agree that business cycles do exist, even if they disagree about their causes, durations, and relative levels of predictability (or whether they are indeed predictable at all). This presentation about them was a good one, which helped to show some of the current theories on this mysterious subject. But I count myself a skeptic regarding many of these theories, and will probably remain so until better evidence comes along. (As someone who has basically minored in economics, I can tell you that these issues seem too complex for me to take these kinds of claims very seriously.)
Nikolai Kondratiev, an economist associated with these theories of cycles
I don't know that I'd actually want to go out there and “invest my own money,” but I wanted to round out my knowledge of business (and particularly finance). Thus, I found these presentations useful – not to mention interesting.
If you liked this post, you might also like:
Part of an audiobook series
Secrets of the Great Investors
Bargain Hunters, Contrarians, Cycles, and Waves
Others to be covered later
See also the audiobook series
Great Economic Thinkers
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