The market rally off its recent lows is paying off for some contrarian investors (see WSJ article). While contrarian investing can mean many things, it often involves buying out-of-favor and beaten-down stocks, or selling those that are over-extended after a nice, and often too-far, too-fast, rally. Essentially, contrarian investors often go against the grain of market sentiment. Of course, given the massive sell-off, some could argue that the markets had no were else to go but up, but timing is important, and hindsight is 20-20. Whom among us was 100 percent certain late last year that the markets were not going lower, or for that matter, were going to recover at all anytime soon, even for a quick bear rally? Even successful contrarian investors such as Warren Buffett, Bill Miller, and David Dreman had a difficult 2008, with Buffett himself adding to down investments prematurely. While those with less than perfect timing may eventually be proven to once again beat the market if held long enough (often a requirement for contrarian investors who have low levels of turnover and high levels of patience), those that are most successful understand both timing and value. It is important to remember that beaten down companies can go lower, or even fail, while those running up too fast can keep soring as the markets remain irrational longer than your ability to remain solvent. But now, in the mists of a nice bear (or new bull) rally, it is easy to once again have stars in our investing eyes. Yet while we dream, contrarian investors may already be looking for those stars that are ready to fall back to earth after a nice, and possibly unjustified, run. After all, summer is often a good time for spotting shooting stars, which are really not stars at all, but bits of dust and rock burning up as they fall from the sky. Maybe now is the time to start enjoying the show.

There is an interesting article in the WSJ about Bill Miller, and the fall of his once lauded Legg Mason Value Trust fund. After continuing to dip into the value market, buying many beaten down financial companies, the fund has fallen from $4.3 billion AUM from over $16.5 billion just a year ago. The fund that was consistently one of the top performers over the years is now among the worse for one-, three-, five-, and ten-year periods based on Morningstar's rankings.

The IEA is forecasting a contraction in world oil demand, the first in 25 years (see WSJ article). Spare production capacity is at a six year high among OPEC members. Specifically for the US, consumption is expected to fall off 6.3% this year, and another 1.4% in 2009. China is expected to fall 3.5% in 2009 after increasing oil consumption 5.3% in 2008.

Charge-off rates among credit-card issuers are expected to rise more than expected in Q4, after rising more than 6% in Q3 (see WSJ article). Roll rates, which indicate that customers will go from late to not paying, was up 20%. The roll rate for American Express increased to 47% in Q3 from 35% during the same time last year. Capital One increased to 34% from 28% over the last year. Given that unemployment is a leading indicator of credit card defaults, the numbers are not all that surprising.

Defensive stock Proctor and Gamble lowered its sales outlook for the current quarter, stating that organic sales growth will fall short of the previous 4-6% growth targets given just a few months ago (see WSJ article). The stock is down nearly 20% for the year, but still fairing better than the broader market.