“The way to make big money is to be right at exactly the right time.” — Edwin Lefevre (p. 180, “The Maxims of Wall Street”)
“Math wins!” — Jim Bowen, First Trust Chicago (p. 90)
Special Announcement: My publisher, Eagle Financial Publications, has just posted my special 40th Anniversary Report, “Seven Golden Lessons: An Editor’s Perspective After 40 Years.” It contains all the valuable lessons I’ve learned in 40 years on Wall Street. Since starting my newsletter, “Forecasts & Strategies,” in 1980, I’ve seen it all — boom and bust, bull and bear markets, the thrill of victory and the agony of defeat, and have survived and prospered through it all.
There is no charge for this report. Feel free to circulate among your friends, family and colleagues.
Now for today’s Skousen CAFÉ:
I just finished reading a fascinating book, “The Man Who Solved the Market,” the story of the world’s most successful investor. No, he’s not Warren Buffett or George Soros.
He’s a mathematical genius you probably have never heard of. Jim Simons runs a private hedge fund called Renaissance Technologies, including the Medallion Fund, that has an average annualized return of 66% and has not had a losing year since 1989. His fund made 150% in 2008, the year of the financial crisis.
His fund is the envy of all hedge funds, especially since Simons charges an average 39% every year in management and profit-sharing fees! (Jack Bogle must be turning over in his grave.)
Jim Simons is worth $23 billion and is on the Forbes 400 Richest List… So he’s done pretty well with his “quant” system of beating the market.
His story is told by Greg Zuckerman, a veteran reporter for the Wall Street Journal. You can buy his book on Amazon: https://www.amazon.com/Man-Who-Solved-Market-Revolution/dp/073521798X.
Mathematicians Do It Better!
One of the most unique features about his hedge fund is that the entire staff at Renaissance consists of mathematicians and scientists, not finance people.
They are technical traders who go long and short, making hundreds of buy and sell decisions every day and taking advantage of anomalies in the marketplace to make money.
They are high-frequency traders with an average holding period of two days. They are right only 51% of the time, but with thousands of trades, they can beat the market.
Simons states, “Patterns of price movement are not random. However, they’re close enough to random so that getting some excess, some edge out of it, is not easy and not so obvious, thank God.”
Simons’ success reminds me of the book “Market Wizards,” by Jack Schwager, who interviewed technical traders who had done spectacularly well, but one could never figure out their “system” of achieving such success. Simons’ computer-generated buys and sells are based on anomalies in trading patterns — but are so complex it can’t be explained or duplicated by others. Renaissance staff are sworn to secrecy.
The only way to take advantage of Jim Simons’ strategy is to invest in his fund — but it’s not open to the public.
Besides, the Renaissance Technologies Fund runs the danger that every successful fund faces — getting too big to the point where they can no longer beat the market. It happened to Buffett’s Berkshire Hathaway, and it can happen to Simons’ fund.
Simons himself has stated, “There’s no such thing as the goose that lays the golden egg forever.”
Stick with the Fundamentals
You may be tempted to become a short-term trader. Just remember, most investors fail to beat the market using high-frequency trading techniques. It took years of research and hit-and-miss strategies for Simons’ firm to find superior trading techniques. And there are thousands of Wall Street “quant” firms that are competing with Simons.
Fortunately, there are many ways to climb a mountain, to quote “The Maxims of Wall Street.” I take a long-term approach that does not require 24/7 monitoring and high risks.
My strategy is to buy good quality companies in expanding industries that enjoy above average and rising dividend policies. I call it the SWAN Strategy — Sleep Well At Night.
Last year, some of my SWAN stocks rose 40-60%, without all the headaches and risks associated with high-frequency trading. My long-term system won’t outperform Simons’ funds, but why get greedy?
Good investing, AEIOU,
Celebrate 40 Years of Forecasts & Strategies at FreedomFest, July 13-16, Paris Resort, Las Vegas
I have a lot of people to thank for keeping my newsletter going through these years: my wife Jo Ann, especially for providing a sounding board and editing each issue to make my writing clear and sensible; a series of managing editors and marketing directors; my publishing company’s original owner, Tom Phillips, who has been with me from the beginning and has offered unwavering support; Salem Media President David Evans, Eagle Financial Publications’ Vice President Roger Michalski, my longtime editor Paul Dykewicz and our creative marketing team, for their constant encouragement and innovative plans to expand my services, including the four online, short-term trading services that we began in 2005.
Last, but not least, I want to thank the hundreds of thousands of subscribers who have renewed their subscriptions, asked questions, given me counsel, and become friends at conferences and on cruises. I even appreciate those who have come up to me at seminars and begun a conversation with the words “I used to subscribe to your newsletter,” because I learn from them, too.
In celebration of this year, the 40th anniversary of Forecasts & Strategies, Eagle Financial Publications is hosting a special three-day financial seminar at FreedomFest, scheduled for Monday-Thursday, July 13-16, at the Paris Resort, Las Vegas.
I encourage every subscriber to join us. In addition to our electrifying keynote speaker, Dr. Jordan Peterson, the theme of our three-day investment conference will be “Forecasts & Strategies for a New Decade.” I’ve invited the top forecasters and visionaries who have had a great track record in predicting the future of science & technology, politics and the markets. They are few and far between!
When you come to this year’s FreedomFest, be sure to buy a 2020 American Eagle Silver Dollar. Keep this silver dollar with you as a good luck piece, the way I have carried mine in my pocket for 30 years. The date, 2020, is a perfect remembrance of the 40th anniversary: 20 + 20 = 40!
To sign up for FreedomFest (July 13-16, 2020, Paris Resort, Las Vegas), go to www.freedomfest.com and use code FF20EAGLE, or call 1-855-850-3733 ext. 202. You will be glad you did. FreedomFest has changed people’s lives.
What will the next decade of Forecasts & Strategies bring? Will it be another Roaring Twenties or a Great Depression? Stick around and we will witness history together.
This Just In: I was interviewed on Jan. 15 by libertarian economist and author extraordinaire Tom Woods on the “Tom Woods Show,” a fiery report on the good, bad and ugly of the American Economic Association meetings (AEA) last week in San Diego. Click here to listen.
I’m pleased to announce that for the first time in 10 years, Tom Woods will be speaking at this year’s FreedomFest on his new book “AOC is Wrong!” and many other topics. See you there!
You Blew It
Correction! Universities’ Brazen Violations of Title IX
In last week’s “You Blew it” column, I reported that Janet Yellen, the first female Fed chair and first female president of the American Economics Association, approved 41 sessions on gender bias and sex discrimination.
Unfortunately, Prof. Mark J. Perry, chief economist of the American Enterprise Institute, wasn’t invited to give his side of this controversial issue.
At the end of the column, I misstated Professor Mark J. Perry’s position on Title IX.
He emailed me and said, “I’m holding universities accountable for violating Title IX, which prohibits ALL sex discrimination, including sex discrimination against men.” He is on a mission to eliminate violations of Title IX and sex discrimination.
His speech topic at FreedomFest 2020 will be: “Civil Rights for All: My One-Man Mission to Expose Higher Education’s Brazen Violations of Title IX’s Prohibition of Sex Discrimination.”
He stated, “Starting in 2016, I have been on a one-man mission to challenge universities across the country that violate Title IX by filing nearly 100 Title IX complaints with the Department of Education’s Office for Civil Rights. About a dozen of those complaints have been successfully resolved in my favor, nearly 40 other complaints have resulted in federal investigations of civil rights violations that are ongoing, and another 40 complaints are currently being reviewed by the Office for Civil Rights.”
“Title IX was passed in 1972 to prohibit sex discrimination in higher education and help remove any barriers women faced succeeding in American colleges and universities.
“Subsequently, women advanced so rapidly that they outnumbered men in higher education for college enrollment by 1979 and outnumbered men for earning bachelor’s and master’s degrees by 1982.
“So for the last 40 years, men have been an underrepresented minority in higher education and the gender disparity favoring women has increased steadily over time.
“Since 1982, the growing ‘gender degree gap’ has resulted in women earning nearly 14 million more college degrees than men.
“And yet women in higher education today continue to receive a hugely disproportionate share of campus resources, funding, fellowships, centers, awards and scholarships, as if they were still an underrepresented minority facing barriers like they once did in the 1950s and 1960s.
“For example, universities across the country routinely and illegally offer single-sex, female-only programs that discriminate against men and other non-female students and faculty in brazen violation of Title IX’s prohibition of sex discrimination.
“Up until recently, universities have engaged in illegal sex discrimination with impunity because they haven’t been challenged and held accountable for violating Title IX.
“By exposing Title IX violations, it is my mission to advance civil rights for all persons in higher education and end the hypocritical, double-standard for enforcement of sex discrimination that has prevailed for so many decades at colleges and universities in the US.”
Too bad he didn’t get a chance to tell his story at the AEA meetings. But he will get his chance at www.freedomfest.com. Come join us for the fireworks.