The Stock Market Winter will last a decade; Trade like a contrarian to survive – Jason Shapiro

(Kitco News) – The S&P 500 is down 14 percent year-to-date, and the NASDAQ is down 22 percent. A question that many investors seek to know is when the market will return to its prior highs.

If history is a guide, then markets won’t recover for another decade, said Jason Shapiro, Principal at JS Shapiro LLC and a key figure in Jack Schwager’s 2020 book, Unknown Market Wizards.

“The type of money that piled into the stock market over the last couple of years is not money that makes good returns,” he said. “My feeling is that in the long-term… I don’t think there’s going to be any positive return on the stock market… ‘Buy-and-hold’ for the next 10 to 15 years is not going to be very good. “

Shapiro suggested that trading within the market is the best way to make returns.

He spoke with David Lin, Anchor and Producer at Kitco News.

Trading the Market

Shapiro pointed to Japanese stock market history, claiming that even in a down market, profits can be made. The Nikkei 225 is an index of Japanese stocks.

“The Nikkei is down about 28 percent from its highs, thirty-two and a half years ago,” he explained. “In those thirty-two and a half years… there are something like 40 moves where the market moved 20 percent or more… so there’s plenty of money to be made.”

Shapiro is a ‘contrarian investor,’ meaning he takes positions oppose to consensus positions in the market. His philosophy implies that when markets get ‘overcrowded,’ then a correction is due.

“I personally do not use price as an indicator,” he said. “I strictly look at participation. In other words, if people are too short, I’m going to buy. If people are too long, I’m going to sell.”

He mentioned that there are two data sources he uses to gauge participation: The Commitment of Traders Report and the options volatility skew. The rest of his trades are carried out based on “discretion.”

Jim Cramer, contrarian indicator?

A Wharton school study found that TV investing star Jim Cramer, who recommends stocks to his viewers, under-performed the S&P 500 over time.

Shapiro confirmed that Jim Cramer is a good contrarian indicator, and that doing the opposite of what Cramer suggests can be a sound investment strategy.

“I bought Boeing stock the day that Jim Cramer came out and said he was selling Boeing stock,” Shapiro claimed. “I think Boeing is up 40 percent in eight weeks since then… If you went ahead and looked at [Cramer’s] long-term returns for his charitable trusts… I’m sure they are under-performing the market by quite a bit.”

However, Shapiro cautioned that as more people catch on to the fact that Cramer is a “fade” or a good “contrarian indicator,” this can lead to Cramer in fact pointing in the right direction.”

“It’s almost time to start going with Jim Cramer because people want to go against him,” said Shapiro. “In truth, I don’t have anything personally against Jim Cramer. He does his job, he’s an entertainer.”

To find out how Shapiro times the market, and his thoughts on precious metals, watch the above video.

Follow David Lin on Twitter: @davidlin_TV

Follow Kitco News on Twitter: @KitcoNewsNOW

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.


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