This blog was written 24 hours before Arsenal’s loss to Stoke. Everything football and media-wise from that game reinforces my findings and conclusions.
Positivistas: This is not a blog about me per se but am using my experience to explain to our audience the meaning of a contrarian world view and how it applies to the football club we so love and support. After all so much is written and said about this club on a daily basis which, to me at least, is confusing and contradictory and makes absolutely no sense. Hopefully this essay may be helpful in providing a rational and logical perspective.
A contrarian according to the Webster on-line dictionary is defined as:
“One who takes a contrary view or action, especially an investor who makes decisions that contradict prevailing wisdom, as in buying securities that are unpopular at the time.”
Contrarian investors are usually successfully because they buy stocks when they are cheap due to their unpopularity and profit from them when their value rises over time.
Contrarians Rely on the Unbiased Data
As a self-described contrarian I will therefore typically disagree with or proceed against current opinion or established practice. But contrarians do not disagree simply to be disagreeable. Any successful contrarian investor, will base their opinions and findings entirely on the unbiased data, meaning it is subject to robust statistical analysis and not stitched up to suit a particular viewpoint.
Thus, for example, in my last blog I did not prescribe either an attack or defense oriented approach this season after analyzing 21 years of data demonstrating a widening gap in Goals-Against between Arsenal and the winning teams in the premier league. The data was clearly suggesting a more balanced approach where the club not only aims to score more goals but also concentrate on conceding less.
It may interest you how I arrived at this outlook. Twenty years ago I became one of the increasing millions of Americans whose employer no longer offer standard pensions, the alternative was a defined savings plans, in my case it being the very popular 401(k) retirement plan. Initially I was one of those passive investors who followed the conventional rules proclaimed by brokers, investment advisers and the mainstream media, i.e. always fully invested in the market regardless of highs and lows. Despite repeated evidence that the stock market is a dangerous place for uninformed amateurs I was like a lamb to the slaughter buying high and sell low.
My “Damascene” moment was the 2008-2009 crisis when, like almost all my American cohorts, my retirement nest-egg was almost totally wiped out by the stock market crash. I then learnt, like millions, how the big investment houses and banks such as Goldman, Merrill-Lynch, Deutsche, Barclays, etc., engineered the bubble arm-in-arm with the mainstream media, conveniently bailing out before the shit-hit-the-fan.
Public Sentiment Is A Contrarian Indicator
It is well known among all academic studies that when it comes to market performance public sentiment is a contrarian indicator. The public is inclined to buy on good news when prices are high and sell on bad news when prices are low; clearly a losing proposition.
Contrarians partially attribute this to Freud’s theory that unconsciously we human beings are often motivated by our primal instincts of fear and despair. Thus, for example, I was one of millions in 2007 who feared missing out on the rising market, refusing to sell when the market was topping out. Similarly, when the market hit rock bottom in 2009-2010 and the Feds were pumping trillions in the market most of us missed the monumental increase in stock prices out of despair that the market would ever recover again.
Similarly, how many times have Arsenal fans acted irrationally based on fear sown by the mainstream media that the club is on the edge of disaster because of a run of bad results. Despite 21 years of history showing Arsene Wenger is the most knowledgeable, most accomplished and most consistent manager in the league, fans have been frequently stirred and motivated to drive their greatest ever manager out of the club. At the very moment they are acting most irrationally the club is usually digging itself out of a hole. Last year was no exception. While the mainstream media was rushing to wager bets as to how soon Arsene Wenger would get his pink-slip, between April and May the club won 10 out of 11 matches to not only move from 8th to 5th in the league but to also secure its 3rd FA cup title in four years.
Mainstream Media Can Never Be Neutral
Much related and connected to public sentiment is the role of the mainstream media which is often the purveyors of public opinion. Contrary to conventional wisdom that the media has a neutral, unbiased interest in reporting facts, when it comes to money and investing they have a commercial interest in propagating fear and despair. Fear sells. It generates newspaper sales, listeners/viewers in radio/television and clicks on-line.
No commercially-oriented media company benefits from the boring up and down behavior of the market. To the contrary, if a media company is commercially dependent on investment banks, brokers, mutual funds etc., it is in their objective interest to hype a rise and fall of the market. At the very least, there are commissions to be made by market insiders when stocks are heavily traded.
Oftentimes a media representative, like a broker, may be professionally aware that the market is set for a fall, but because his or her commission is tied to generating new sales, he/she continue to induce more lemmings to invest, leading them like little lambs to the slaughter. No wonder so many of us were fully invested in worthless mortgage-related stocks during the last crash.
No Interest In Boring Arsenal
Similarly no commercial media house has an interest in “boring, boring” Arsenal. Just in terms of sheer numbers, supporters of the football club are clearly a fertile market for media exploitation. For example, from the reports I have read, Arsenal has the biggest online presence among football clubs worldwide. Since Wenger transformed the club into one of the biggest in England, there are now huge expectations by fans season after season. Correspondingly among these fans is chronic anxiety that the club may be falling behind its better financed rivals, not only to the traditional commercial giant Manchester United but the nouveau rich externally financed clubs, Chelsea and City.
It is no surprise that not a day passes without an alarming story in the mainstream media portending disaster at Arsenal football Club. Take for example, this week’s headlines from a Google search:
Liverpool join Arsenal in race for Jean Michael Seri: Reds in talks with Nice – Daily Express
Liverpool on brink of signing Arsenal target Jean Michael Seri – Daily Star
Liverpool Set to Sign Ligue 1 Midfield Star Seri Ahead of Arsenal, Tottenham – Sports Illustrated
It begs the question has Arsenal ever publicly disclosed an interest in signing Seri? Does the club ever get into a bidding war for any player? Any informed fan should have the answer to both questions.
Public Sentiment Is Against Arsenal
What of the current predictions by the media for Arsenal this season? As evident below is all doom and gloom:
- 6th Place – Guardian (Writers predictions)
- 6th Place – BBC (Writers predictions)
- 4th Place – ESPN (Writers predictions)
One wonders what are the factual bases for these predictions. We have had 21 years of Arsenal averaging 3rd position in the premier league and never falling out of the top-4 except last season. This new campaign the club has kept all of its top players from the previous season and furthermore strengthened the squad with: (1) the second highest goal-scorer from the French league, and (2) a left-back who made the Budesliga best XI for the last season.
The fundamental data is therefore indicating the current squad is deeper and better qualitatively than it was last year and, arguably, better than it has ever been since 2005. It seems to me a clear case of the mainstream media once again discounting the facts and data and simply emphasizing current negative public sentiment. What a surprise!
Contrarians are usually in a small minority, at least initially. I am therefore amongst a precious few who will confidently wager on a title challenge. In fact I will go further and predict Arsenal will most certainly regain its top-3 position. Only a total injury disaster will prevent this achievement and, if they are allowed to get away with it, undue referee bias.
For the sake of irony, I will conclude with the following disclosure: Information in this essay is not investment advice. Please consult a financial professional to help make decisions suitable to your particular situation and risk tolerance. That should take care of the bleeding football “experts” writing blogs, tweeting and doing podcasts.
Arsenal this season may well suffer from undue referee bias and another penalty embargo but vs Stoke they were statistically dominant despite being denied two penalties and a good goal ruled offside. The following summary was obtained from Whoscored.com:
|4||Shots on target||6|
|63%||Pass Success %||88%|
|64%||Aerial Duel Success||36%|
I rest my case.