Dollar Sentiment; Contrary Thinking as an Art; MarketFolly; and More!

Not as low as I expected, according to an ad hoc reader survey we conducted this week.

Earlier in the week, I read that the percentage of dollar bulls was reported to be under 10%, indicating that the dollar may be setup for another long, powerful rally – with sentiment readings resembling those recorded at previous dollar bottoms.

So, I decided to conduct a little experiment, and asked readers if they were bullish or bearish on the dollar – here are the results:

• 44% dollar bulls

• 56% dollar bears

A few weeks ago my wife sent me to a used book store to attempt to sell back some old books at our place. While browsing the investing section (of course), I came across The Art of Contrary Thinking – a book written in 1954 by Humphrey B. Neill.

Neill was editor of Neill Letters of Contrary Opinion, a newsletter that reviewed investment themes and ideas that were contrary to public sentiment. So being an “aspiring contrarian” myself, I had to pick up a copy! (My wife rolled her eyes when I brought it in the door…)

It was an entertaining, insightful, and fast read – I’d recommend it. There is one part in particular I’d like to share.

Let me start by saying that I’ve come to enjoy reading old books, because they reflect the sentiment of the day. I now prefer reading books that are “dated”, and thus not tainted with the biases of today – I’d rather experience the biases of yesterday!

Regular readers know that I’m a flip flopper when it comes to the inflation/deflation debate. I previously believed we were destined for inflation/hyperinflation – and recently changed my outlook when I realized that EVERYONE believed just about the same thing!

Even if that view is correct – it will be very difficult to make money off of “deflation now, inflation soon” – because it’s already priced into the market.

Many inflationists become quite livid when you suggest the possibility that inflation could take longer than most believe. The common belief is that inflation is baked in the cards, because Ben Bernanke and Co are determined not to repeat the “mistakes” of The Great Depression. Thus, they will err on the side of caution, which will result in high inflation, possibly hyperinflation.

For some historical context, I’m going to quote Neill on page 59…and remember, these words were written in 1954:

Is it possible that a contrary psychology prevails again – with the average person more worried about paying down their debts, which are denominated in dollars, than the price of gold? Perhaps.

I’ve learned that contrary thinking is not about figuring out common wisdom and doing the opposite. Rather, it’s about considering ALL possible scenarios in your thought process – no matter how outlandish they may sound!

Again, the book was a great read. And we’ll continue to increase our focus on public sentiment, because I’m really starting to believe it’s something that most investors do not rely upon nearly enough (myself especially included!)

Interview with Leading Investment Blogger, MarketFolly

This week we started a fun back and forth interview with Jay from MarketFolly. For those of you not familiar with MarketFolly – please go there now! It’s an excellent site for tracking the latest holdings and insights of the greatest investors in the world.

Here’s our interview with Jay about his investing strategy, and the complimentary piece where he grilled me a little bit. Part II will be out this week.

• HUGE oil inventories were reported last week…could this be setting the stage for a crash in the price of oil?

• Foreign investment in the US is going down, down, down…how exactly are we going to fund this multi-trillion dollar deficit?

• Taxes on stripper poles??? How’s a girl supposed to make a living these days?

• Jim Rogers AND Marc Faber say they would not be buying Chinese shares right now…anyone buying China now must believe they are smarter than these two.

• Think Natural Gas is cheap? You might think again after reading this analysis.

• How did Intel report such good results? We got the inside scoop…direct from an Intel senior executive!

• Finally, for the novice – and veteran – trader, here are the three things you need to do to trade markets properly.

For our weekly subscribers – we now have a daily subscription option as well (check out the upper left corner of the page).

It’s powered by Google – they send you one email each afternoon, with a wrap up of posts from the day. They do a nice job with it – so if you’d like to add a daily subscription, you can enter your email address in the box there.

Still long cotton…

I’m considering shorting the S&P if/when the next wave down hits. Doesn’t look like we’re there just yet…public sentiment is bullish, but not quite wild enough to indicate a top.

Shorting oil may also be a potential play…though every commodity analyst on the planet seems to concur that oil is overpriced with respect to fundamentals right now.

Current Account Value: $25,088.91