The stock market winter will last a decade; Trade against the tide to survive – Jason Shapiro
(Kitco News) – The S&P 500 is down 14% year-to-date and the NASDAQ is down 22%. A question that many investors want to know is when the market will return to its previous highs.
If history is any guide, markets won’t rally for another decade, said Jason Shapiro, director of JS Shapiro LLC and key figure in Jack Schwager’s 2020 book, Unknown market assistants.
“The kind of money that has been building up in the stock market over the past two years is not money that has historically made good returns,” he said. “My feeling is that over the long term…I don’t think there will be any positive return in the stock market…’Buy-and-hold’ for the next 10 to 15 years is not going to be very good.”
Shapiro suggested that trading the market is the best way to earn returns.
He spoke with David Lin, presenter and producer at Kitco News.
Negotiate the market
Shapiro touched on the history of the Japanese stock market, saying that even in a bear market, profits can be made. The Nikkei 225 is an index of Japanese stocks.
“The Nikkei is down about 28% from its highs of thirty-two and a half years ago,” he explained. “In those thirty-two and a half years…there’s been something like 40 moves where the market has moved 20% or more…so there’s a lot of money to be made.”
Shapiro is a “contrarian investor,” meaning he takes positions opposite to consensus positions in the market. His philosophy implies that when markets become “overcrowded”, a correction is due.
“Personally, I don’t use price as an indicator,” he said. “I strictly watch participation. In other words, if people are too short, I will buy. If people are too long, I will sell.”
He mentioned that he uses two data sources to gauge participation: the Trader Engagement Report and the Options Volatility Bias. The rest of his trades are done based on “stealth”.
Jim Cramer, contrarian indicator?
A study by the School of Wharton found that TV investing star Jim Cramer, who recommends stocks to his viewers, has 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 Boeing stock the day Jim Cramer came out and said he was selling Boeing stock,” Shapiro said. “I think Boeing is up 40% in eight weeks since then… If you go ahead and look [Cramer’s] long-term returns for his charitable trusts…I’m sure they’re underperforming the market a bit.”
However, Shapiro cautioned that as more people realize that Cramer is a “fade” or a good “contrary indicator,” it may lead Cramer to point in the right direction.”
“It’s almost time to start with Jim Cramer because people want to go against him,” Shapiro said. “In truth, I have nothing personally against Jim Cramer. He does his job, he’s an artist.”
To find out how Shapiro times the market and his thoughts on precious metals, watch the video above.
Follow David Lin on Twitter: @davidlin_TV
Follow Kitco News on Twitter: @KitcoNewsNOW
Disclaimer: The opinions 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; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.