Should You Hire a Psychic to Manage Your Portfolio?James Cordelaine
We live in an enlightened age – or so we tell ourselves. Most of us don’t feel pressed to check in periodically with a twenty-first-century Nostradamus or Edgar Cayce for their predictions about the stock market or the economy.
But when markets continue to rock and roll as they have these last six months, perplexed investors hunger for explanations – even if the news they ultimately hear and read doesn’t sound promising. They need something to hang their hat on to make decisions about managing their portfolios.
But in today’s media-run investing world, being a successful predictor of markets doesn’t entail being right as much as it requires having the hide of a rhinoceros. You simply throw a lot of stuff out there – and if something sticks, you get yourself some publicity, even if you are the proverbial stopped clock. If you get it wrong, just pick up the pieces of your cracked crystal ball and keep talking. The last time anybody checked, the SEC doesn’t regulate psychics.
The predictions of one particular psychic, aka investment guru, Mark Yusko, founder and CEO of Morgan Creek Capital Management, are being touted right now by CNBC.
Last year, Yusko predicted crude oil would drop to close to thirty dollars per barrel. He also predicted deflation would rule economic conditions in the global economy.As a reward for his gutsy prediction, Yusko earned the right to repeat himself during what’s become his customary “Bold Predictions” talk at the Inside ETFs conference in Hollywood, Florida on Monday, “There’s no chance we’re going to get any spike, upward movement in oil. It’s not going to happen,” Yusko announced to his audience.
During his speech Yusko also predicted a “messy bankruptcy” for Glencore, a multinational Anglo-Swiss commodity trading and mining firm. But with all due respect to Yusko’s psychic aptitude, Glencore’s been suffering immense debt problems for the past year, and its London-traded shares have slipped by seventy percent. Let’s face it – if you or I had the hide of a rhinoceros, we could confidently stand in front of hundreds of investors and make a similar call about the price of oil or Glencore (hint: given the company’s financial dire straits, your odds of being correct are far better than fifty-fifty).
But hats off to Mr. Yusko who, after being forced out of the partnership of the Endowment firm in 2013, didn’t let his career as a psychic get derailed, even when his former partners made the following comment, “Recent participation in tender offers from the Fund indicates that a meaningful number of investors in the Fund have lost confidence in Mr. Yusko’s ability to deliver results consistent with expectations and we believe that a change is warranted.”
My point is sometimes you call it right and sometimes you call it wrong. But nobody knows for sure (let’s allow for the possibility Yusko’s ex-partner was attempting to cast aspersions on him when the partnership broke up).
At the same conference Monday Vanguard CEO Bill McNabb commented that we should not expect any more than decent returns, five to seven percent at best, from a “diversified portfolios of stocks and bonds” during the next decade.
Given the inconsistent performance of stocks and bonds over the last six months, McNabb’s assessment seems likely enough. But nobody knows for sure.
It’s precisely because nobody knows for sure – and not that Yusko and McNabb are necessarily right or wrong — that you and I need to hedge increasingly uncertain bets with heavyweight tangible assets including physical gold. Gold is what investors run to when their psychics, aka investment advisors, get it wrong. By the time those burned investors start thinking about running, personally, I’ll already be there.
Gold is time-tested and predictable for its ability to preserve the buying power of inflation-vulnerable dollars. If you have some stock “winners” in your portfolio right now, as hard as it is mentally, you have to remember the time-proven wisdom is: Buy low, sell high. Move some profits into gold, either for direct purchase or through a gold IRA. Now as almost never before, what they don’t know can hurt you. But with enough gold anchoring your portfolio, you’ll no longer be dependent on guesswork – yours or a psychic’s.