Counter-cyclical traders bask in year results

They lost out to bulls who saw the rally as the start of a sustainable recovery from earlier depressed levels, subject to normal blips.

The table shows what happened to market indices in New Zealand, Australia, US, UK and Japan over the past year and since the end of 2003. All indices recorded solid improvements in the 12 months ended last Friday, although the US benchmarks have dipped slightly since December.

Counter-cyclical traders who bought stocks in March and April 2003 when prices were depressed (Japan was at a 20-year low) would be enjoying subsequent gains, the extent of the enjoyment depending on whether they still held the investments or if and when they took profit.

Comments in the National Business Review about counter-cyclical investing, including those made last July, have noted that the technique required nerve and some arrogance, whether people were operating as traders or for longer periods.

Arrogance arose from setting one's judgment against the majority in deciding to buy when everyone else sold and selling when they bought.

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