SANTA BARBARA, Calif., July 30, 2002 (PRIMEZONE) -- The $impleMoney Newsletter outperformed 99% of the 7,000 U.S.-diversified mutual funds for the first half of 2002 and the gain for 2001 was 36%, said Dr. Joe Scifers, editor of the newsletter.
Scifers sees better times ahead but urges caution while the current level of fear subsides: "Investors are playing poker with Wall Street and are losing. This may be the worst time for the individual investor since the Great Crash of '29. Wall Street is interested more in marketing than markets. There is evidence that analysts cannot be trusted. The SEC and the exchanges have failed to do their jobs. Corporate chicanery if not criminality is rampant. Don't delude yourself into thinking that government intervention is the cure. Want to know why we have the CEO stock options problem? The government, in its wisdom, thought that CEO pay was too high so they limited the amount of CEO pay that could be deducted as a corporate expense. In response the corporations turned to remuneration through stock options. Which led to cooking the books and manipulation of stock prices. The government did not invent the Law of Unintended Consequences, but they have perfected it. Investment data has become a cacophony of noise and numbers. It is not a pretty picture for investors. Still, very good returns can be made even in this market. If you know when to hold 'em and know when to fold 'em.
"Great poker players have two things in common," continued Scifers. "They consider the odds and they know when to fold. Investors could learn a lot from poker players. The two greatest failings of investors are not taking the odds (risk) into account and not knowing when to fold (sell).
"When was the last time your Wall Street broker or analyst or advisor dealt you a winning hand? As of May of this year, 70% of stocks were up. Anyone recommend those stocks for your portfolio? If you had picked stocks at random you would probably be better off. On the folding or sell side, only two percent of all analysts recommendations are to sell, an amazing statistic given the carnage of the last two years. Two percent sell calls while the market indexes plummeted and precious few winning calls during a period in which 70% of the stocks were up. Maybe, just maybe, the deck is stacked against you.
"The individual investor needs Wall Street like a snake needs gloves or chopsticks. But don't despair and get out of the game. The market will come back, soon and vigorously. The secret is to find a fair game.
"Play where the professional and enlightened investors play. The two superior investment alternatives for the last five, ten, and fifteen year periods have been hedge funds and investment newsletters. Hedge funds work because of financial incentives for the managers and because they have access to tools that are denied to mutual fund and other money managers. Newsletters work because they are independent. Their income derives from subscriptions instead of fees, commissions, loads, and questionable investment banking relationships.
"Look into hedge funds (difficult in that they are not allowed to advertise). The minimums are high because most hedge funds are limited to 99 investors.
"The best source of information for the individual investor is newsletters. They offer independent thinking, objective analysis, and a winning track record. In short, a fair game. If you know when to hold 'em and know when to fold 'em. Which you can learn more about at www.scifers.com."
Dr.Scifers background includes graduation from the U.S. Naval Academy and a doctorate from the Harvard Business School, as well as graduate degrees from Stanford and Columbia. In addition to the CIA, he has worked at the Rand Corporation and in the first Bush White House. In the '80s he founded a successful engineering and software development company. He currently manages two hedge funds and publishes the $impleMoney Newsletter. Samples of the newsletter can be found at his website: www.scifers.com.