At least one new financial guru is about to rise from the ashes of the current global economic bloodbath. This will be a financial advisor who accurately called the market top in October of 2007 and went to cash, and then called the market bottom, whenever that will be, and bought back in.
Is there such an advisor? Absolutely. The law of mathematical probability dictates that someone, somewhere, will get lucky. Perhaps even two or three someones. Each of them is primed to make a mint on newsletters, books, and new clients for the next 20 years.
That’s what happened 30 years ago for an advisor named Joe Granville. In the 1970’s and 1980’s it was Granville who rose to investment guru fame for his bear market calls. He strongly predicted the stock market was heading for imminent collapse. Thousands of investors signed up for his newsletter, The Granville Market Letter, and his investment speeches were well attended. Granville was quite the showman, often emerging from a coffin to start his speech.
Unfortunately, those who followed Granville’s advice for the next 25 years didn’t fare so well. Joe, who is now 82, never called a market turn right again. According to the Hulbert Financial Digest’s rankings for performance over the past 25 years, Joe has lost his readers 20% per year on an annualized basis. Ouch!
Still, the recent market crash has produced a fresh batch of people who are vowing never to listen to the “buy and hold” guys ever again. Bill O’Reilly of Fox News is one of them. Many investment advisors are among them, too. Those disillusioned investors and advisors are in search of a new investment philosophy and will be happy to line up at the door of those who “got it right” in hopes of earning back what they’ve lost.
Of course, it will take them years to realize that their newfound guru of market timing has feet of clay. While they watch the “buy and hold” investors recover from the losses, the chances are they will watch their own losses continue to mount. Eventually, the gravy train will stop for the new gurus when their dedicated disciples become dismayed with their annual returns and realize that the gurus have never hit a market top and bottom again since their great calls in the Global Market Crash of 2008.
Market timing is a loser’s game for most who play it. However, probability dictates that someone will always make the call to get out at a market top and get in at a market bottom. There will be others who got close enough for bragging rights who will cash in, too.
Whoever the new gurus are, they will in no way acknowledge that their success was just pure, random luck. They will vehemently argue it was produced by the way they sliced and diced various investment data and their proprietary formulas. They will explain in great detail how they “saw this coming.”
Of course, their timely advice going forward can be yours, at a price. The newest profit prophets of investment prognostication will be born.
Being a buy and hold investment advisor, on the other hand, isn’t racy or exciting to the news media. You will never see a buy and hold advisor’s hottest new picks featured on the cover of Money Magazine.
Trust me, if I knew a market-timing formula that would work, I would be using it right now. But I don’t. Neither, as far as I know, does anyone else. Exciting or not, charismatic gurus or not, buy and hold is still the wise way to go.