The Klarenbach Report, Oct 11

“It is ok to be contrarian, as long as you don’t try to be.”

My wife, Michele and I were on an aircraft between Saskatoon and Vancouver.

Most people prefer the aisle seat. Not my wife. She prefers to nap on flights with the window seat as her preference.

Michele has the window seat. A finely dressed gentleman has the aisle. I am in the middle, which suits me just fine. I prefer the middle seat, and when given the responsibility to book the flight will often select that seat as my preference.

I find people fascinating, with the middle seat strategy providing twice as many people to visit with, and if one, Michele, for example is sleeping ... well, you get the picture.

On this particular flight, I was reading Micheal Covel’s book, Trend Following, with Michele sleeping on my left and the finely dressed gentleman to my right.

We were twenty minutes into the flight before I broke down and initiated a conversation with the finely dressed gentleman to my right.

The finely dressed gentleman, Calvin, is a Saskatchewan ex-pat living in London. The ex-London investment banker and current art broker was great at conversation and sharing nuggets of wisdom.

During our dialogue, I mentioned that I have a proclivity to be contrarian. Calvin, thought about this briefly, responding, “It is ok to be contrarian, as long as you don’t try to be.”

A fascinating coincidence, considering the book that I was holding in my hands provides numerous statistical examples proving why following the trend outperforms contrarian investing.

Calvin’s advice has stuck with me.

Today, I was sharing with my wonderful wife, Michele, that I may be the only analyst with a bearish sentiment about a particular commodity.

“Why are you bearish, Trent?”

My wife is wise, she knows me well with this question forcing me to reflect and examine my bearish sentiment.

Is my analysis free of bias?

Or am I trying to separate myself from the herd with a contrarian analysis?

The mind is powerful, and we see what we want to see.

Consider that growers tend to believe their product is undervalued and will rise in price.

Buyers typically expect lower prices in the future.

We have a natural tendency to give higher weight to the news that supports our beliefs.

Rain in grain-growing regions will either increase yield or reduce the quality.

Drought will reduce yield or improve grain quality.

We are fascinated by the news and often fail to ask if the news is accurate.

Is the news timely?

Has it been interpreted properly?

Do I understand the secondary and tertiary effects of the news event?

As a market technician, I follow the premise that the market does not care what I think, believe, or hope will happen.

Market technicians attempt to remove the emotion from our analysis by focusing on price with little consideration of the news.

We believe, as Brian Shannon coined, Only Price Pays.

Opinions, Hopes and Dreams do not.

Perhaps we should focus on what we know with certainty.

Past and current prices.

And make new friends, people are interesting.

Trent Klarenbach, BSA AgEc, publishes the Klarenbach Grain Report and the Klarenbach Special Crops Report, which can be read at https://www.klarenbach.ca/