Yesterday, one of my favorite clients called and was wondering if we should move some of his portfolio to cash. I asked him why and he mentioned that he heard on CNBC that the markets were about to drop 80%.
I'm pleased to report that he didn't sell and I'm hoping my advice saved him from the siren call of timing the market. Many have tried and all have failed over the long term.
Note: I said long term, not short term!
Just in case you didn't get the series of memos that have been repeated again and again over the last 40 or so years by some of the smartest people in finance, you can't time the market.
Anyways, I couldn't help but research this 80% crash nonsense and stumbled across this wonderful link.
I've never heard of this site. So if you get lost in all the gory articles and links, you've been warned.
Just focus on the pictorial and have fun thinking about how terrible these so called "experts" look today. In fact, some of them are still making outlandish predictions.
Imagine acting on some of these predictions? You would have lost a fortune.
From what I can gather, none of these fortune tellers have a reliable record of predicting the future. If they did, why on earth would they be in the media?
Here's a simple fact. Some of the richest hedge fund managers in the world are extremely secretive and never talk to the media. If they do talk, you can bet they are selling their book in order to pump up or down the value of their holdings.
Renaissance is a great example. The founders are each worth a couple of billion and managed to compound the Medallion Fund at 35% or more per year.
This is the most amazing track record in the history of finance and they NEVER talked to the media.
Oh, they closed the fund and only manage money for the founders and employees.
Have you ever heard of this firm? Don't worry, no one knows about them unless you are a Wall Street nerd like me.
Let me leave you with some thoughts to ponder.
All these gurus have something to sell you. Typically a high priced newsletter or worse, a managed investment program that would cost anywhere from 2 to 4 percent a year in advisory fees or commissions. If they are a hedge fund, they will charge 2% a year plus 20% of all the money they make you.
For example, Marc Faber, who recently predicted another 40 to 80% crash, has one of the worst track records I've ever seen but continues to pay to be featured on CNBC.
You know these people pay to be on CNBC right?
Want his newsletter? It will cost you $300 per year.
Here's a few nuggets of wisdom.
"Pigs will fly before you’ll ever see a full list of the expert’s past forecasts, including the blooper."
-Jason Zweig, famous financial expert
"We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
"We have met the enemy and he is us,"
-Pogo, famous comic strip
I'm not sure how the conversation with my client will end since I cannot possibly predict the future or my client's behavior. All I know is the Dow Jones Industrial Average has been bouncing up and down from about 100 in the early part of the 20th Century all the way up to 16,300 or so today.
Do you see a trend?