THE LIFE OF A CONTRARIAN….

By Nick Grovich, President of American Federal

 Is not always pleasant. You’re always buying when everyone else is selling, going right when the whole world is left and usually taking heat for it. Why? It normally works, although not always immediately.

 I’ve dabbled in real estate in AZ. I’ve bought in the desert and the mountains (yes AZ has mountains and good skiing) I normally make offers on desert land when it’s 115 degrees out and buy in the mountains after blizzard or power failure. It’s not a perfect system but it works.

 I try to do the same in other investments. I’m mostly out of the stock market even though every now and then I jump in and out with small amounts of money. Unfortunately I’ve been mostly out for the last 2 years. But I feel confident that it can’t go up forever. I agree with people like Doug Casey and Dr. Gary North that the market is an accident waiting to happen. Just like the coins market in 1989. Likewise I’ve been steadily buying great rare coins as the market has been falling.

 I have a real aversion to jumping on the bandwagon once it’s been on its way for years. Of course I am sometimes buying and selling early and as you can image I do get flak for it.

 I was reading Doug Casey’s last newsletter in which he reiterated his conviction for a downturn in the stock market. It brought to mind several observations that we share. I won’t quote him directly but we share the same idea.

 There are a lot of people I’ve met over the years who always want to follow the crowd. "Its easier", they claim that you should always follow the recent track record and never go against the trend.

If I followed this strategy I would have gone long oil in the late seventies, just before it came back down I would have stocked up on gold in 1979 at $650 to $870 an ounce and I would have sold stocks in 1987. I would have bought rare coins in mid 1989, at five to ten times the price they are today.

Continuing to follow this advice I would be buying stocks heavily today and selling rare coins! Being true to my convictions I’m doing the opposite. I’m convinced that when you start seeing the "experts" flip flop

It’s about time the markets change. In the last few months I’ve seen writers who have been predicting $1000 all of a sudden turn around and predict $190 gold. I’ve seen "Gold Bugs" turn into stockbrokers, analysts and advisors. Many of the same people who were calling for stock crash are now looking for a 10,000, 15,000 and even 20,000 Dow.

The stock market seems to be a bit shaky lately. It’s having a tough time staying over 8000 (kind of like gold was acting around $400) Will it go higher? I don’t know, but it is acting like a market near it’s top, like the Japanese market of 89. The rare coin market has actually strengthened and become more active in the last two months.

I believe the contrarians will soon have their day in the sun. Think about it. Rare Coins could double and still be less than half of their prices in 1989. The Dow would have to reach about 16,000. Which is more likely is for you to decide.