Carl A.Futia – The Art of Contrarian Trading
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Description
Why is it so difficult to outperform the market? How can you prevent becoming entangled in bubbles and crashes? The solutions may be found in Carl Futia’s latest book, The Art of Contrarian Trading. This book will teach you Futia’s unique contrarian trading strategy from the bottom up.
Futia covers the ideas and practice of contrarian trading in 16 chapters rich with data and many historical instances. Discover the Edge that distinguishes successful speculators from losers. Learn how to use the No Free Lunch concept to develop effective trading strategies. Learn about the wisdom and folly of investment crowds, as well as how crowds are produced by information cascades that drive stock prices too high or too low in comparison to fair value. Discover the power of your Media Diary – and how to use it to detect information cascades, assess the strength of the crowd’s views, and determine when the crowd’s point of view is going to be proven incorrect.
You will see Futia use these contrarian trading ideas to navigate securely and profitably over the previous 26 difficult years of roller coaster swings in the US stock market – a time when Futia kept his own media record and built his Grand Strategy of Contrarian Trading. Check out how this Grand Strategy performed during the Great Bull Market of 1982-2000. Observe the Contrarian Rebalancing approach in action during the 2000-2002 dot.com meltdown. Find out when the Aggressive Contrarian Trader purchased and sold during the 2002-2007 bull market. Learn about the origins of the 2008 Panic, as well as the ups and downs of contrarian trading during that risky period.
Futia demonstrates how magazine covers and newspaper headlines forecasted market turning events from 1982 to 2008, astoundingly and persistently encouraging investors to do the wrong thing at the wrong time. A trader or investor will be well-equipped to predict and benefit from market turning events by watching crowd beliefs shown by news media headlines and using the information supplied by the many historical examples Futia gives.
Section I: Table of Contents
Preface.
Can You Outperform the Market?
The Speculator’s Point.
Providing Assistance to Investors.
Identifying Market Errors.
Examining the Evidence.
Timing the market.
Catch 22.
CHAPITRE 2: MARKET MISCONDUCT.
Markets that are efficient.
Stock markets and roller coasters.
Do stock prices fluctuate excessively?
Consider Behavioral Finance.
Behavioral Finance and Market Exploitation.
No Free Lunch Again.
The Third Chapter.
A Market Mistake Theory.
Go along to get along.
Go ahead and make a mistake.
The Crowd’s Social Calculus.
A Contrarian Trader’s Perspective.
CHAPTER 4: The Wisdom and Illusions of Crowds.
Is it possible for a crowd to be wiser than its members?
The Importance of Collective Wisdom.
Financial Markets Decisions on Their Own.
Market Psychology Prediction.
Information flows into the vortex of speculation.
The Life Cycle and Psychology of an Investment Crowd, Chapter 5.
Prologue.
The Life and Death Cycle.
The stock market bubble that lasted from 1994 to 2000.
This Time Is Different: The New Information Economy.
The Bear Crowd of 2001-2002: Shattered Dreams.
Popular Instincts and the Search for Consistency.
The Investment Crowd’s Pied Pipers.
Investment Crowds’ Mental Unity.
Suggestion, Volatility, and Disintegration.
CHAPTER 6: The Historical Context of Market Mistakes.
Market Crowds and Mature Investment Themes.
Errors vs fair value.
Market Information Sources.
The Fatal Error.
When Does the Stock Market Become (Extremely) Overpriced?
When does the stock market become undervalued?
The End of the Oil Bubble.
CHAPTER 7: Crowd Communication.
What Can Investors Learn From Information Cascades?
The Mass Media’s Role.
A Thought on Personal Flexibility and the Future of Media.
Market surveillance.
The History of Bubbles and Crashes.
CHAPTER 8: Making Your Media Diary.
Getting an Advantage.
In 2002, My Diary Made a Difference.
Prepare to cut and paste.
Excerpts from my November 2005 Media Diary.
Excerpts from My Media Diary for the Month of June 2006.
Making sense of magazine covers.
CHAPTER 9 Important Investment Themes.
Telling the Market’s Story.
New Eras.
Effect of War and International Political Crises on the Stock Market.
Financial Crises Create Crowds.
New Industries and Companies.
Commodity Booms.
Interest Rate Movements and the Bond Market.
Using Your Media Diary to Track Investment Themes.
CHAPTER 10 Interpreting Your Diary: Market Semiotics.
Media and Information Cascades.
Your Media Diary: A Living History of Information Cascades.
Semiotics: The Study of Signs.
The Most Important Sign: The Price Chart.
Magazine Cover Stories.
Newspaper Headlines.
Front Page Stories and Editorials.
Crystallizing Events.
The Weight of the Evidence.
More on Market Semiotics.
CHAPTER 11 The Grand Strategy of Contrarian Trading.
Contrarian Investment Planning.
Contrarian Trader’s Investment Portfolio.
The Investment Goal of the Contrarian Trader.
A Warning about Capital Gains Taxes.
Contrarian Trading Strategy #1: Don’t Speculate.
Contrarian Trading Strategy #2: Don’t Invest with the Crowd.
Contrarian Trading Strategy #3: Contrarian Rebalancing.
The Aggressive Contrarian.
A Long-Only Strategy for the Aggressive Contrarian Trader.
More Aggressive Contrarian Trading Strategies.
CHAPTER 12 The Great Bull Market of 1982-2000.
Prologue.
The 1987 Crash.
Interlude: The 1929-1932 Crash and Bear Market.
The S&L Crisis, the 1987-1990 Bull Market, and the 1990 Bear Market Crowd.
Rally without Joy, 1991-1994.
The Stock Market Bubble Inflates, 1995-2000.
The Aggressive Contrarian Faces the 1987 Crash.
The 1990 Low.
Long Term Capital Management Goes Bust.
Chapter 13 Collapse of the Bubble: The 2000-2002 Bear Market.
The End of the Great Bull Market.
Contrarian Rebalancing during the 2000-2002 Bear Market.
The Long Way Down Again.
Contrarian Rebalancing during the Crash.
The Aggressive Contrarian During the 2000-2002 Bear Market.
A Wall Street Wreck.
The Summer Rally.
The March 2001 Plunge.
Terrorists Attack on 9/11.
End of a Bear Market.
Transition to a New Bull Market.
CHAPTER 14 The Postbubble Bull Market of 2002-2007.
Escaping the Bear’s Claw
What Bull? Looking for Signs of a Bullish Information Cascade.
The Story of Google’s IPO.
The Housing Bubble.
Aggressive Contrarian Trading during the 2002-2007 Bull Market.
April 2005—A Buying Opportunity.
June 2006—Another Buying Opportunity.
Aggressive Contrarian Trading in Early 2007.
July-October 2007.
CHAPTER 15 The Panic of 2008.
The Conservative Contrarian during the Panic.
The Mortgage Mess.
The Debt-Deflation Spiral Takes Hold.
Lenders of Last Resort.
The Credit Crisis and the Contrarian Trader.
Bull Market Top and the First Step Down.
The Bear Stearns Failure.
Fannie and Freddie.
The Crash: Bankruptcy of Lehman Brothers.
CHAPTER 16 Vignettes on Contrarian Thought and Practice.
The Psychology of the Stock Market.
The Godfather of Contrary Opinion.
Opinion Polls: What Do You Think?
Is The Odd Lotter Always Wrong?
A Forecasting Giant of the Past.
Paul Montgomery, The Magazine Cover Contrarian.
Irrational Exuberance and Other Bubbles.
Value Investing—A Back of the Envelope Approach.
About the Author.
Index.
Author Information
CARL FUTIA is a trader who runs a highly rated investment/trading blog (carlfutia.blogspot.com). He provides very specific price forecasts for the stock, bond, and various commodity markets. Futia’s main tools are derived from the theory of contrary opinion and box theory. He holds a BA in economics from Yale University, a master’s degree in mathematics from the University of California at Berkeley, and a PhD in mathematical economics from Berkeley as well. Futia has published several papers in theoretical economics in scholarly journals.
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