Hi Guys,
I just returned from a self-imposed four-day, concentrated investment barrage at the annual Las Vegas MoneyShow. The event organizers, Kim and Charles Githler, do a remarkable job balancing the disparate purposes, goals, and agendas of the presenters and the attendees.
I find the exposure to such a wide universe of investment alternatives and players, both professional and amateur, educational and exciting. The conference is a great occasion to study all participants. It affords an opportunity to talk eyeball-to-eyeball with the human machinery that keeps the marketplace vibrant from both the seller and buyer vantage point.
Sellers and buyers were all accessible. I discussed matters with attendees from Alaska, Maine, Texas, Florida, and Wisconsin, essentially from the four-corners of the United States.
All the participants shared at least one widespread perspective: the upcoming national election outcomes are crucial to a more robust market recovery. The commonly expressed viewpoint was 100 % consistent regarding the significance of the November event. I have never experienced such an overwhelming and coherent perspective. This suggests that the early inventors of the economics discipline had it right when they originally called their emerging science “political economics”.
It is somewhat puzzling that numerous presenters openly volunteered the poor forecasting track record that burdens the market gurus overall.
Mark Hulbert, from the MarketWatch website and the Hulbert Financial Digest, generously conceded that 80 % of the roughly 200 investment newsletters that he monitors and constructs portfolios from their recommendations, fail to achieve market returns This conclusion is consistent with similar findings reported from a host of other investment group and entity studies: experts do not statistically produce excess returns.
Hulbert speculated on the inconsistent performance from these self-proclaimed market prognosticators. Even the giants in this hazardous industry suffer major meltdowns. On an individual level, James Dimon and J. P. Morgan Chase’s recent bond debacle, and Warren Buffett’s underperformance for the last three years, were used to illustrate the fragility of even the most respected market wizards.
The markets are a dangerous place even for the well informed, the well positioned, and the deep-pocketed players. As Daniel Kahneman observed in “Thinking, Fast and Slow”, overconfidence takes its costly toll.
At an alumni breakfast, an overarching theme of economist Mark Skousen’s talk was to caution his audience not to overreact to sharp presentations that lured customers with exaggerated reward promises.
Mining and Oil exploratory firms were heavily represented as event sponsors and exhibitors. They proffered wildcat drilling options for as “little” as 25 thousand dollars per share per hole. One such project was located in Kansas. I guess for a long time now Kansas has been identified as a place for uncertain adventures associated with jumping down a rabbit hole.
In their defense, these high risk firms did honestly discuss the uncertainties coupled to dry holes. So they advised that at least 4 sites should be purchased for risk diversification purposes. That’s costly risk insurance. This is an illustration of the kind of investment that Mark Skausen was obliquely referencing.
Also, I suspect (my interpretation) that Skausen was circuitously warning of the endless array of technical tool kits being sold throughout the conference. These tools are complex, have countless interactive options, feature colorful displays, and deploy sophisticated statistical analyses techniques supported by extensive historical databases. These are data rich and attractive products. They are also costly. Lectures on these computer tools were particularly well attended. It is not clear if the simulation promises can be delivered in the real world.
For example, CycleProfit’s Michael Turner held a session that advocated a very short-term covered calls option strategy that “potentially” could generate an income stream of about 20 % per year. The backbone for the strategy is the eloquent and complex statistical methods that Turner developed for his time-cycle forecasts.
Fundamentally, his database is constructed from historical daily price movements massaged in a very sophisticated timeframe manner. He freely acknowledges that his projection one year away will require frequent revision, but he concurrently claims that his 60 to 90 day forecasted movements are highly reliable. He has anecdotal support from a few users. But an independent scientific systematic study has not been completed to challenge his assertion. He could be right; he could be wrong. So, buyer beware.
The term “Guarded Optimism” can function as a general summation of the numerous presentations that addressed global economic and market trendlines. Almost all presenters identified at least a few muted profitable equity ventures. Even Bear market protagonists such as Martin Pring highlighted limited upside potential using a shorter cycle business timeline model.
Bonds were generically assessed as bad investments given the current political, economical, and financial environment. However, I did not attend any of the forums specifically dedicated to the bond world.
Sam Stovall further documented the sell-in-May calendar effect, but proposed an enhancement strategy approach that featured a sell the S&P 500 in May baseline, but a stay in equities with a summer sector rotation into consumer staples and healthcare tactic addition.
A representative from James Stack’s InvesTech operation out of Whitefish, Montana reported that the preponderance of Stack’s 50-odd market direction signals remain bullish. The conservative, safety-first Jim Stack sees no significant market downturn as the November election cycle approaches.
At the international level, the meeting consensus implied that US problems and issues were far more manageable than the foreign versions of the same problem set. The international wizards assessments were grounded on our accumulated national wealth and our flexible, entrepreneurial capitalistic framework. Our global experts were much more worried over the future prospects of France, and, surprisingly from my limited understanding, the longer haul projections for both China and India. These meta-trend experts greatly fear the uncertain and interactive couplings between politics and economics in these surging nations.
I always enjoy my visits to the Las Vegas edition of the MoneyShow. The organizers reported over 8,000 pre-registrations this year, down about 20 % from the record high noted two years ago. Times are tough for both sponsors and attendees alike. The event educational seminars were not as prolific as in previous years. Too bad, but still worth the effort to participate. You get the chance to exchange ideas with both winners and losers in the financial community. It’s a great learning opportunity.
I encourage you to consider attending one of these extravaganzas. Within the next few months upcoming MoneyShows will be convened in San Francisco and Chicago. Internationally, events will be conducted in Toronto, Shanghai, and London. When attending, I suggest you keep your hand away from your wallet when participating in sessions with so many highly polished and accomplished presenters.
You must resist urges to act quickly. Once again, it is prudent to engage in both fast and slow thinking.
Best Regards.
Comments
I attended the 6th annual New Orleans Investment Conference in 1979, which was started by James Blanchard in 1974. This conference is still in place today.
Mr. Skousen was there then, too; although with more hair at the time.
I was just a young pup at the time; but it was all I could do to keep up with 5 days of events with the main speakers during the day long sessions and any number of evening events. I slept during most the flight home to Michigan.
A note that has nothing to do with all of the invesment data attempting to be absorbed by my brain, was the number of interesting people I met from all areas of the U.S., with wide variances in backgrounds and a large age spread.
One area that pops into my mind periodically, is the first day of the event; which was a large party for all attendees in the evening at the N.O. Hilton. As we checked into the Hyatt, we were given an updated package of events which included a note about the start time of the party and that if one chose (weather permitting, and it did) at time "x" a party parade of attendees from the other various hotels would be at the Hyatt at time "x". Be in the lobby and ready to go if you want to walk the 5 blocks or so, to the Hilton. Leaving the lobby for the walking parade found a gentleman at the door asking, "Whether you might prefer one of the wines or champagne?" A most large plastic glass of choice was poured and out the door you traveled to join the others being lead by a large high school band in full dress and playing every form of New Orleans style music.
What a beginning!
A few years later, by mail; Mr. Skousen contacted us regarding an interesting venture with the requirement to invest $25,000 to bid upon something named "cell phone spectrum" ownerships. And no, we were much too young and poor at the time. Did catch eBay later in life though.
Regards,
Catch
Hi Catch,
Your reflections on the early finance conferences reminded me of a few more of Skousen’s commentary at the MoneyShow breakfast.
Apparently, the genesis of its evolving format can be traced to the late 1970s when Charles Githler organized some exchange seminars for individual investors. The concept morphed into its more modern MoneyShow style when Kim Githler joined the organization. The MoneyShow company was established in 1981.
At the breakfast, Mark Skousen claimed to be the last standing presenter who participated in the first gathering. He is an informed, a lively, and a charming lecturer. His presentations are filled with entertaining and instructive stories.
At the end of his talk, I had an opportunity to discuss his hugely successful textbook “The Making of Modern Economics” with him. The book was initially published in 2001, and an updated version has been recently released according to Skousen. The book was originally designed to combat the overemphasis on Keynesian economics found in Robert Heilbroner’s “The Worldly Philosophers”. I own both volumes; they are both superb.
Skousen always introduces personal vignettes into his story-telling. When outlining the early life of Adam Smith, Skousen relates the tale that at age four, the father of economics was kidnapped by a band of traveling gypsies. Fortunately for the economic world, he was soon returned because “He would have made a poor gypsy”. The world has prospered because of that lucky happening.
Mark Skousen still publishes his “Forecasts and Strategies” newsletter. It is now in its 33rd year. His most recent textbook “Economic Logic” was first printed in 2010. Not surprisingly, it’s yet another attempt to get Austrian economics into the mainstream. His portfolio recommendations include individual stocks and no-load mutual funds like Janus Triton Fund (JATTX).
Thanks for sharing your memories of a distant but exciting past experience.
Best Wishes.