One should never be contrarian for the sake of being contrarian! Nevertheless, I do find it helpful to list a bunch of contrarian positions and think about them. Here are some contrarian positions one can take right now. The items below may conflict with each other and should only be used as a thought exercise. I urge readers to leave any additional ideas they have in a comment.
(Positions that interest me are bolded.)
- US government bonds (short)
- US corporate bonds (long)
- real estate (long)
- commodities (long)
- gold (short)
- US$ (short or long): Depending on one's outlook, I think one can argue that either a short or a long position would be contrarian (since the market doesn't seem to favour it strongly either way.) I would consider a bullish (long) bet to be more contrarian since I notice more people questioning the strength of the US$, particularly due to the FedRes and government spending plans.
- Distressed sectors, particularly homebuilders, select American and European banks, and retailers (long)
- Underperforming sectors, such as newspapers, forestry companies, automobile-related (long): As opposed to the aforementioned distressed sectors, these ones have been undergoing long-term declines even before the economic and credit crisis unfolded. Companies in this category may be facing secular declinines that may be the end of their industry so one needs to be really careful.
- large caps (long): Not a major contrarian call but large caps have been performing poorly over the last decade compared to almost all other asset types. Jeremy Grantham speculates that high quality US large caps will outperform the lower quality large caps and small caps over the next 7 years.
- China (long)
- Emerging markets, such as Brazil, India, Turkey, Eastern Europe (long)
- Beaten-down emerging markets, specifically Russia, Vietnam, Thailand, Iceland (long): Countries which have seen large currency devaluations, such as Russia and Iceland, are the most contrarian.
I'm sure I'm missing some but these are what came to mind now. Tags: contrarian