An alert contrarian knows how to spot the top and bottoms in any market. Since most markets and sectors go higher and lower than one could imagine, there are no better contrarian indicators than the front covers than popular financial publications.
Our second confirmation of a top in real estate occurred on the latest cover of Time Magazine. The headline read, " HOME SWEET HOME: WHY WE坦E GOING GA-GA OVER REAL ESTATE". The may 30th issue of Fortune proclaimed, " REAL ESTATE GOLD RUSH".
Let's add another hot investment to the list, Hedge Funds. On the latest cover of Fortune the attention getter was "IS GREED STILL GOOD?" Let's see what Alan Greenspan had to say recently.
Greenspan spoke via satellite to a bankers conference in Beijing warned about hedge fund speculation :
"After its recent very rapid advance, the hedge fund industry could temporarily shrink, and many wealthy fund managers and investors could become less wealthy".
In his remarks, Greenspan said that hedge funds have taken big risks with the unusually low long-term interest rates prevailing around the globe. He also said, the abnormal behavior of interest rates had encouraged greater risk-taking.
Greenspan also remarked about the on going battle between the rise in short term rates, and the decline in longer term rates:
Greenspan said : "We've never run into anything like this before". "The economic and financial world is changing in ways that we still do not fully comprehend ".
Foreign central banks, in particular China, have been heavy buyers of U.S. Treasuries, which has been the culpret in driving down longer term rates. Investors who have been in search for higher returns are taking more risks buy investing in hedge funds.
Greenspan said, that a "Significant numbers of trading strategies are already destined to prove disappointing, a point that recent data on the distribution of hedge fund returns seem to be confirming."
As I have said before, I do not know when the party is going to end, but the real question is: How much are you willing to bet?
