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The Real Contrarian Trade

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The hope trade, in many ways, is the contrarian trade.

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Chew on this: While most contrarians here think that we are due for a massive cliff, they are still the crowd! Not so contrarian after all, is it? Now, I repeat, I insist, I pound on it: I understand why this is so. I understand the risks of fiscal and social entitlements, the risk of European collapse, the risk of US collapse, and China's hard landing. But then, again, no matter how you twist it, this thinking is crowded; the doom and gloom of European issues and the US fiscal cliff are on everyone's mind, not the hope, the bull, the next great overshot, or the "what if we make it through?"

I then wanted to take the argument one step further and talk about yet another bullish "black swan." Fast-forward to 2025! What if indeed France becomes Greece-like, as long as India becomes USA-like? Sixty-five million people versus 1.5 billion! Think about this: Maybe indeed Europe slowly declines as an economic group from first (depending on some metrics) to second to fifth… if China, India and Brazil replace Europe, and explode into 2020.

If you think I'm crazy, just remember this: Smack in 2000, France's economy was larger than China's! Twelve years ago, no one invested in Shanghai nor in Apple (AAPL)! (Here's the typical Wiki source.)

Fast forward -- note that the 2025 version of the Shanghai stock exchange or the next Apple are not even popular yet! The big short might indeed be the slow decline of the USA or Europe, but what about the really big bull? What will be the 2025 versions of China and Apple?

This article is not about having the answers. It is an invitation to join me in looking for them. Moreover, it is really an invitation to dream -- to find the equivalent of Apple at $28 on Jan. 3, 2000 or find the next block of BRICs.

This article is really about the Big Hope, because, in this day and age, that is the truly contrarian trade!

Twitter: @Alex_Salomon

This article was originally published on See It Market.
No positions in stocks mentioned.
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