I have known an interesting man for over six decades – for eight years, he was the physician to the wives and children of the king of Saudi Arabia, among other fascinating things. He spoke highly of The Dines Letter in a recent conversation with me. If you look into this investment newsletter, here are some of the claims which you will see:
- “I subscribed to The Dines Letter and took roughly $125,000 and turned it into $1 million after taxes.”
- “James Dines, one of the world’s foremost financial forecasters”
- “…one of the most fantastic investment calls on record…”
- “Subscribers continue to reap huge profits”
Who can resist that? The knowledgeable can and do.
This newsletter has been in business for over 40 years; it has wide appeal. However, knowledgeable investors are aware of the unimpressive, evidence-based track record of investment newsletters, generally.*
“…been in business for over 40 years…”? So has the Flat Earth Society and numerous religious cults and other organizations which Monday Morning members look into for amusement.
What do we know for certain?
- Buying the US economy as a whole has been the best investment for over 200 years. It will likely remain the best investment into the foreseeable future.
- In less than one hour, we can teach a high school student how to equal the market, that is, the US economy.
- Outperforming the market over the long run (a decade or more) is nearly impossible.
- SPIVA convincingly shows that over the course of a market cycle (peak to trough to peak), about 5% of investors outperform the simple act of buying and holding an exchange-traded fund which tracks the S&P 500.
- Investors on average cannot beat investors on average.
- It is dangerous to prophesy, especially about the future.
The best that we can say about the Dines Letter is that it has never faced an SEC enforcement action, as have hundreds of advisory services.
*Jaffe, Jeffrey F. and Mahoney, James M., The Performance of Investment Newsletters (October 1998). FRB of New York Staff Report No. 48, Available at SSRN: https://ssrn.com/abstract=937407 or http://dx.doi.org/10.2139/ssrn.937407
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