What the Really Smart Money is Buying

That's what David Dreman told me last Friday.

We talked about an hour after the markets closed. At the time, a Reuters headline proclaimed, "Worst January Ever for Dow, S&P 500." The Dow sat at 8,000.

It was a pretty brutal week for the markets. But here's the thing, Dreman didn't seem too worried. I'd even go as far to say he was upbeat.

Why wasn't Dreman too worried?

You see, he's the contrarian's contrarian. Some call him the "dean" of contrarian investing. He literally wrote the book on contrarian investing – Contrarian Investment Strategy - back in the late 70's.

And the late 70's was a time, much like now, when no one wanted to buy stocks. A decade of sub-par returns had every investor and speculator paying top-dollar for Chinese vases, gold coins, and California real estate…practically everything but stocks.

Here's what he wrote in his book about the markets back then:

"…individuals have exited en masse from the marketplace. Brokers too have suffered. Scores of [NYSE] member firms, some dating back a century or more, have gone out of business or been forced to merge. To date, over fifty thousand jobs have disappeared on Wall Street since the beginning of the decade. Harvard Business School graduates, those supposed savants of where opportunity lies, now shun Wall Street like the plague."

Sound similar?

Wall Street's oldest firms are going out of business or merging. Financial sector jobs are disappearing. And those "Harvard Business School savants" – they're behind some of the biggest problems. Rick Wagoner (GM), John Thain (Merrill Lynch), Jeffrey Immelt (GE), Hank Paulson, and George Bush are all Harvard MBA's.

Of course, Dreman's contrarian thesis wasn't about how bad everything was in the late 70's. It was about how a shift in investor attitudes towards stocks was about to change. On the last page of the book Dreman says (this is the last quote I promise - I have a copy right behind my desk):

"Institutional concentration, conformity pressures on professionals and overreactions to the current economic problems seem to me to present the investor with some of the greatest stock market opportunities in decades."

Sound familiar?

Now it's pretty easy to see why Dreman was fairly upbeat. He's been through tough markets before. And when stocks did come back, as he predicted, they came back in a big, big way. When Contrarian Investment Strategy was published, the S&P 500 was sitting around 100 and the Dow was trading around 900.

So when we started talking about what opportunities he is finding out there, he really got me thinking. Dreman talked positively about financial stocks, with a caveat of diversification and a truly long-term outlook. (Note: A full transcript of our talk will be available to Prosperity Dispatch readers soon)

I know, I know…What on earth could he be thinking? Financial stocks – now?

But hey, that's a debate for another day. For now, I just want to focus on how some of the world's greatest investors are finding opportunity.

You see, there are a few truly great money managers out there. Many of them, we hardly ever hear from. I realize Warren Buffett practically can't buy a share without sparking a dozen headlines. And every sentence Jim Rogers says travels at light-speed throughout the blogosphere. So we know what they're up to. But what about the others? What are the less-publicized, yet equally successful professional investors finding?

Well, I delved into it a bit and it turns out they're finding a lot including "a $10 trillion opportunity" and "a very rare opportunity…one not seen in 30 years." Let's have a look at what the best of the best are finding.