Stock lessons from George Costanza
George Costanza turns his life around when he decides to do the exact opposite of whatever he thinks he should do. Looking at the high beta market rally, a similar strategy might work for investing.
The cast of NBC's 'Seinfeld,' is shown in this undated handout photo. Pictured from left are; Michael Richards as Kramer, Jason Alexander as George Costanza, Julia Louis-Dreyfus as Elaine Benes and Jerry Seinfeld as Jerry Seinfeld.
AP Photo/Columbia/TriStar Television Distribution/File
George Costanza: "My life is the opposite of everything I want it to be. Every instinct I have, in every part of life, be it something to wear, something to eat ... It's all been wrong."
In a classic episode of Seinfeld called The Opposite, perma-loser George Costanza comes to the realization that if he would just act completely contrarily to his own instincts, things would begin to go his way.
Jerry Seinfeld: "If every instinct you have is wrong, then the opposite would have to be right."
One cannot help but see the parallels between George's epiphany and the paradox of the high beta market rally that has left even the most experienced players in utter disbelief.
Think about how rewarding it's been for traders who have completely violated any sense of prudence or market savvy:
*AIG ($AIG) barely avoids liquidation - buy it and enjoy percentage gains in the thousands!
*Unemployment remains at around 10%, inital jobless claims are still climbing - so buy some specialty or even luxury retailers!
*Mortgage rates are inching higher and housing has not truly bottomed - so snag some Hovnanian ($HOV), some lumber names and why not a little Home Depot ($HD).
*Oil breaks out above $85 - and the airlines go wild!
*Congress passes a de facto takeover of Healthcare - OMG! Healthcare stocks are rallying on the news of their newly subjugated status!
*Commercial RE is a time bomb - REITs! I gotta have more REITs!
We can document dozens of these types of paradoxical setups. Investors are taking almost any opportunity to do the opposite of what they'd normally be expected to do. If everyone in the market is a contrarian, is the true contrarian the non-contrarian? Heh - "Whaaaaat is the deeeeaal with contrarians?" Thanks, Jerry.
If Georgie was running a hedge fund right now and abiding by his counterintuitive life strategy, he'd be absolutely killing it.
George Costanza: "I tell you this, something is happening in my life. it's all happening because I'm completely ignoring every urge towards common sense and good judgment I've ever had. This is no longer just some crazy notion. Jerry, this is my religion!"
Add/view comments on this post.
------------------------------
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.