The stock market winter will last a decade; Act like a contrarian to survive – Jason Shapiro

(Kitco News) – The S&P 500 is down 14 percent this year and the NASDAQ is down 22 percent. One question many investors want to know is when the market will return to its previous highs.

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

“The kind of money that has been piling up in the stock market over the past few years is not money that has historically yielded good returns,” he said. “My feeling is that in the long run… I don’t think there’s going to be a positive return in the stock market… ‘Buy-and-hold’ for the next 10 to 15 years isn’t going to be very good.”

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

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

Trade in the market

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

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

Shapiro is a “contradictory investor,” meaning he takes positions that are opposite to consensus positions in the market. His philosophy is that when markets become ‘overcrowded’, a correction is needed.

“Personally, I don’t use price as an indicator,” he said. “I look strictly at participation. In other words, if people are too short, I’m going to buy. If people are too tall, I’m going to sell.”

He mentioned that there are two data sources he uses to measure participation: the Commitment of Traders report and options volatility. The rest of his trades are carried out on a ‘discretion’ basis.

Jim Cramer, contrarian indicator?

A Wharton school survey found that TV investor Jim Cramer, who recommends stocks to his viewers, underperformed 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 good investment strategy.

“I bought shares of Boeing the day Jim Cramer came out and said he was selling shares of Boeing,” Shapiro claimed. “I think Boeing has gone up 40 percent in eight weeks since then… [Cramer’s] long-term returns for his charitable funds…I’m sure they’re performing quite below the market.”

However, Shapiro cautioned that as more people understand that Cramer is a “blur” or a good “contrary indicator,” it could lead to Cramer, in fact, pointing in the right direction.”

“It’s almost time to start with Jim Cramer because people want to go against him,” Shapiro said. “To be honest, I personally have nothing against Jim Cramer. He does his job, he’s an entertainer.”

Watch the video above to find out how Shapiro times the market and what he thinks about precious metals.

Follow David Lin on Twitter: @davidlin_TV

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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 the accuracy of the information provided; nor Kitco Metals Inc. neither the author can guarantee such accuracy. This article is for informational purposes only. It is not a request to exchange commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article assumes no liability for loss and/or damage arising from the use of this publication.

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