It is 1998. As Dreman writes the book, the markets continue to rise. The way the market rises reminds him of 1929. To gauge the mood of that era, he has gone back and read newspaper clippings depicting the general sentiment before the great stock market crash that preceeded The Great Depression. Upon reflection, Dreman notes that the market euphoria of today (1998) appears to surpass that of the late 20's. He also argues that the price of stocks relative to fundamentals is higher in 1998 than it ever has been.
When he wrote his book in 1982, investors were interested in art, collectibles, precious metals and diamonds. At that time, he felt that stocks were undervalued...but investors weren't interested. Stocks went on to post massive gains in the years that followed.
There are ways to determine if the market is overvalued, Dreman argues, and this book will teach investors how. The contrarian methods Dreman describes and explains throughout the book are both of a fundamental and behavioural nature. Having a good strategy only gets investors part of the way towards making more money in the market; investors also need to understand their innate psychological tendencies that will try to prevent them from carrying out a sound strategy.
Investors overreact to events, both to the upside and to the downside. This is what provides contrarian investors with the opportunities to succeed.
The first function to the strategy Dreman will provide in the book is one based on the preservation of capital. The second function will be to capitalize on market mistakes in order to derive strong returns. Since no strategy should be followed blindly, Dreman will also spend time discussing why the strategies work. The first part of the book, however, will discuss why the widely-accepted, conventional strategies just don't work.