CNBC is one of my favorite contrarian indicators in the markets. Fear and greed are powerful emotions that many talking heads on CNBC can’t resist playing up. You can’t always play whatever they say as a contrarian indicator but whenever they become enthralled by something on the bull side after it has gone up a ton, or petrified of something after it has gone down a ton it’s time to think about fading CNBC.
Here are some of my favorite CNBC fades of the last few years:
1) December 2012 CNBC has a fiscal cliff countdown all month, terrifying viewers of the coming stock market meltdown as 2013 starts. Many people might not remember that but CNBC was extremely bearish headed into 2013. And the result was one of the biggest rallies we’ve seen in quite some time all year in 2013.
2) November 2013 CNBC becomes infatuated by Bitcoin, after it has gone up over $1000 with mind boggling bubble like gains. They bring people on to discuss Bitcoin regularly. The result is Bitcoin makes a major top and is cut in half over the ensuing months. CNBC never mentions the fact that people late into Bitcoin have suffered massive losses.
3) December 2013 and into 2014 CNBC regularly makes fun of gold. Gold makes a major bottom in December 2013 and gold stocks are leading the markets in 2014. No mention of gold stocks leading the market on CNBC that I’ve seen in 2014.
4) Early 2014 it’s time to get terrified of emerging markets according to CNBC. U.S. is the best house in a bad neighborhood repeated regularly on CNBC. Result is emerging markets actually outperforming U.S. markets so far in 2014.
And the latest that I’m adding to the list is be scared of Russia because it’s collapsing. Well there’s a few things we know about Russian markets. First of all the bear market has been around for a while, and it has almost cut the RSX ETF below in half since 2011. So it’s not like it’s coming off of a bubble top or that there is excessive optimism in Russia. In general those are conditions you should be more scared of then a 3-year bear market.
Secondly valuation wise Russian stocks are extremely cheap compared to overvalued markets like the U.S. currently. So in reality Russia is cheap and hated, and is just in search of a final bottom. Russia is still trying to form a Stage 1 base here to end this bear market so it’s still a little early, but it’s also way late in the game to be panicking too. As usual panicking at the bottom will probably turn out to be the wrong move.