Investment advice from Elite Old Guys

Dr Steve Sjuggerud - Thu 18 Mar, 2004

...Its hard to argue with decades of extraordinary success. These guys havent cared what anyone else has thought. Theyve done it their own way. These are the guys with real credibility...

It hit me late last night as I watched George Soros being interviewed...there are the Grumpy Old Men...and then there are the Elite Old Guys. The Elite Old Guys are the investors you’d REALLY want to have on your side.

The Grumpy Old Men are the folks that have been bearish their whole lives. There are thousands of these guys - smart and poor - because they never stepped up to the plate to buy.

Then there are the Elite Old Guys - and these are the guys worth listening to. To carry any credibility with me, you have to have said both “buy” and “sell” in your investment life.

Sounds simple, I know. But you’d be amazed how short the list of Elite Old Guys is - the list of investors that are concerned about making money rather than being proven right.

Let’s take a look at the most credible investors on Wall Street - that small handful of Wall Street old-timers that have actually survived horrible bear markets, that bought stocks heavily when prices were low and nobody was willing to buy, and are still around today and are still relevant.

Richard Russell is 79 years old. He’s written his Dow Theory Letters newsletter since 1958. He is incredibly bearish today. He has nearly all his assets in tax-free municipal bonds. But he’s no Grumpy Old Man. When nobody believed stocks could go higher, Russell put all his assets AND all the money he could borrow into the stock market in 1958. He held tight through 1966, then sold it all, catching one of the great runs in stocks in history.

Today, he sees the big money in gold and gold shares, his largest position outside of his bonds. He cites Newmont Mining as his favorite in his latest newsletter - a name familiar to Daily Reckoning readers, I'm sure.

Then there's David Dreman. Last week, I read the original 1980 version of his book, Contrarian Investing Strategies. Wow! but was Dreman bold...In the 1960s he was frustrated with how expensive stocks were. He recounted in his book: “When I was a student reading the newspapers of the 1930s, 1940s and 1950s, I was amazed by the value so abundant in the stock markets...I felt a little cheated because I thought the great days of investment coups all lay in the past.”

But then 1980 came. Stocks were cheap, and Dreman became a mega-bull, saying in his book...“Since the 1930s [with the exception of the 1974 market] stocks have never been as totally washed out as they are today...the stock market appears cheap by nearly every historical standard.”

“The Death of Equities” was the headline of BusinessWeek magazine at the time. Yet Dreman was buying with all he had. These days, Dreman manages billions of dollars and writes a column for Forbes. He’s been recommending financials and smoking stocks.

George Soros, the most successful investor alive - including Warren Buffett - needs no introduction. Lately, the 74-year-old’s biggest trade is betting against the U.S. dollar (you may recall he famously made a $1 billion dollars betting against the British pound). Soros is doing this by buying other currencies (euro, Aussie, and NZ dollar) and buying gold. He told CNBC “...I now have a short position against the dollar because I listen to what the secretary of the Treasury is telling me.”

Mark Mobius, the youngster in the group in his sixties, still travels to bizarre places looking for investments for you and me 300 days a year. Mobius sees value everywhere today - everywhere that most people are afraid to look, especially emerging markets - like Korea, South Africa, Russia, etc.

And lastly there’s John Neff. Neff called the bottom in US stocks on the cover story of Barron’s in September of 2002. His personal portfolio is loaded with homebuilders...interesting to note.

Two votes for gold. One vote for high-yielding stocks. One vote for investing in currencies other than the dollar. One vote for emerging markets. And one vote for homebuilders. That's the favorites list of the Elite Old Guys.

It’s hard to argue with decades of extraordinary success. These guys haven’t cared what anyone else has thought. They’ve done it their own way. These are the guys with real credibility.

I hope your portfolio isn't too far from what the most credible investors in the world are doing.


Regards,

Steve Sjuggerud
for The Daily Reckoning