Contrarian

Billionaire investor Wilbur Ross made a fortune buying troubled steel companies and selling them. Now, he's being lured by a different kind of trouble: betting on Mother Nature. In the past year or so, Mr. Ross, 69 years old, has been pouring money into companies specializing in catastrophic insurance. Few industries play in such a high-stakes arena: Hurricanes, earthquakes and other catastrophes can easily cause billions of dollars of damage.

In the aftermath of Hurricane Katrina in 2005, premiums for this kind of coverage soared, and remain above pre-Katrina levels. Mr. Ross sees opportunity in that, and is now upping his own bets.

Oil will resume its march toward $100 a barrel after a 'correction,' said Jim Rogers, who predicted the start of the commodities rally in 1999.

'I'm just not smart enough to know how far down it will go and how long it will stay, but I do know that within the context of the bull market, oil will go over $100,'' Rogers said in a Tokyo interview. 'It will go over $150. Whether that is in 2009 or 2013, I don't have a clue, but I know it's going to happen.'

Wall Street's darling is back: Goldilocks, whose economy is neither too hot nor too cold, but just right for optimistic investors. Inflation is under control, earnings are still strong, the outlook is for solid growth. That's why we're in the second-longest rally since 1929, at four years, three months and counting. Since July 2006 in particular stocks have rocked.

Investors Intelligence, which polls Street sentiment, reported recently that 60% felt bullish and were convinced the economy is just right. The run has lulled investors into a false sense of security. After all, Goldilocks was no saint. She broke into someone else's cottage, stole their porridge and busted Baby Bear's chair. As a contrarian, I have always related better to the bears. They are the ones who recognized something was not quite right. That is how I feel as we start the new year.

A correction is inevitable. I'm anticipating at least a 10% market drop sometime this year. Why? Earnings expectations are overly optimistic. After increasing 20% in 2005 and 15% last year, Wall Street is still banking on 10% earnings growth for 2007, double the historical average. But economic expansion is projected to slow to 2.5% in 2007, down from 3.3% in 2006. The smart money knows it is not possible for corporate profits to outpace the underlying economy for very long.

 

It's the end of an era. Andrew Green, one of the best mutual fund managers of the past two decades, finally closed his funds to new money. London-based Green, who works for UBS' Global Asset Management division, decided that $8 billion was about as much as he could handle if he wanted to continue to beat the market. Over 23 years he's turned a $10,000 investment into about $360,000 -- compared to just $95,300 for his benchmark.

How does he do it? Green succeeds by doing what so few fund managers do these days. He bucks trends, ignores fads and shuns traditional sector weightings and allocations. Instead he calls himself a "deep-value contrarian." He looks for shares that are out of favor with investors but where he sees a catalyst that can bring them back into demand.

Dreman/Claymore Dividend and Income Fund run by famed value investor David Dreman released 2006 Annual shareholder report.

David Dreman says "While we look for investment opportunities created by market events, we don’t let the market drive our disciplined investment process. We choose stocks based on our contrarian value philosophy, which is based on our contention that consensus opinion, especially when it comes to investing, is often wrong. We seek companies that we believe are financially sound and that have, for one reason or another, fallen out of favor with the investing public. "