Reflecting on my life, I find a warm sense of kinship with Forrest Gump.
For the handful of you unfamiliar with the fictional Mr. Gump, he’s a cranially challenged individual who by pure happenstance ends up living an extraordinary life brimming with interesting people and historical events.
My kindred feelings emanate from growing up as an educationally unimpressive youth in a small town in the middle of nowhere Hawaii. If my classmates had been asked to rate my post-high-school prospects, I assure you with all sincerity they would have ticked the box “Least likely to succeed.”
Given a second option to check off, “Least likely to survive their teen years” would have finished high as well.
Yet here I sit at the surprisingly old age (at least a surprise to me) of 61, a success by most measures, and with a lifetime of experiences I could have never imagined as I ran about shoeless, shirtless and on a Hawaiian outer island.
Among the experiences I look back upon most fondly are those including interesting people I have met. And I’m not talking about bumping-into-in-an-elevator encounters, but rather personal and business interactions of the sort you can look back on knowing you’ve had sufficient time to take the measure of a person.
These interactions cut across the broad swath of human activity, including well-known politicians such as Margaret Thatcher, with whom I enjoyed a delightful lunch in the company of Jim Rogers as well as Rose and Milton Friedman, the latter of whom I was fortunate to have worked with on numerous occasions.
I also had the pleasure of spending about three hours, over two occasions, in close quarters with then-Governor Ronald Reagan. I had zero idea at the time that he would become president, but I liked him very much as a person and so was glad he did.
My Gumpish wanderings also put me into direct contact with Gerald Ford (not the brightest light), Henry Kissinger (degraded), Gov. Jerry Brown (intense), Gen. Schwarzkopf (congenial), Alexander Haig (a suit) and Dick Cheney, whom I developed a visceral dislike for over the course of a private lunch.
Among the people I most admired and would never have imagined I’d get to know was Ayn Rand. I organized Ayn’s last public appearance (by private railcar from New York) and spent the better part of a week with her and her entourage who—with the exception of Leonard Peikoff, ultimately her heir—struck me as a bunch of sycophantic cretins. While Ayn had the reputation of being something of a Dragon Lady, by the time I met her, just a few months before her death, she was very mellow.
In the category of “Out of the ordinary,” I spent quite a bit of time with Chief Buthelezi of the Zulus, whom I first met over lunch in a remote Holiday Inn in Ulundi, South Africa (a truly surrealistic experience). As a consequence of that meeting, he agreed to speak at a conference I was running back in the United States. Among the details I had to arrange was a sniper on the roof of the Hilton Hotel across from the convention center, because of threats against the chief’s life from his ardent political enemies in the ANZ.
Then there were members of the entertainment community, including Forrest “F Troop” Tucker (whose shoulders I held to prevent him from toppling over the railing in a hotel stairwell while he puked from drinking too much), Chuck “Rifleman” Connors, Zsa Zsa Gabor (worst person I’ve ever met), Buster Crabbe (Flash Gordon), Jonathan Winters, the actors that played Mannix, Thurston Howell III, Lily Munster, Elly May Clampett and too many others to recall on the spot.
In a completely different vein, I was honored to call Haing Ngor of The Killing Fields fame a friend. I got to know him while helping to support freedom fighter movements around the world. In that same era, I came to know the most important leaders of the Nicaraguan Contra movement and enjoyed an absolutely outrageous party with them in a compound in the Costa Rica jungle, with machine gun-toting guards circling the perimeter.
I was also deeply involved in supporting the Renamo rebellion in Mozambique. The latter was a particularly interesting episode in my life, capped off with a high-speed car chase across the Malawi countryside (we won). The head of the resistance movement at the time, Afonso Dhlakama, still owns an American Bowie knife with my name on it.
And then there were captains of industry, including six or so billionaires or near-billionaires I’ve had business dealings with. Many of them I consider friends to this day and so won’t name them here out of respect for their privacy.
Closer to tierra firma, my life has been enriched (or at least entertained) by gauchos, mercenaries (including the late, great Robert MacKenzie, who was involved in the above-mentioned adventure in Mozambique), Special Forces operatives (from the US, UK, Canada and Rhodesia), professional gamblers, knife fighters, prospectors, technology and aviation pioneers (including Burt Rutan, who’s now running the SpaceX program for Virgin Galactic) and a cast of additional characters too long to recount here.
How did this happen to me, a scrawny kid from a small town in the middle of nowhere Hawaii?
If I were to identify a single character trait that led me to the life I have lived, I would point to unbridled curiosity. When faced with a crossroads, I will invariably follow the path that intrigues me the most. Even if—or maybe especially if—it involves the great unknown. While many people fear the unknown, my reflexive reaction is to find out what’s hiding behind the curtain.
To this curiosity, I would add a solid dose of good luck. Any number of my choices—for example, climbing on a plane to Chicago at 19 years old with $10 in my wallet to start a new life—could have ended in disaster. In the vast majority of instances, however, the roll came up a winner.
Forrest Gump himself couldn’t have landed more squarely on his feet.
Now that my fingers are limbered up and the stage is set, I would like to move toward the point of these musings: some personal observations about the many “gurus” I have come to know over the years.
Many years ago, back in the day when it was really something, I ran the New Orleans Investment Conference. It was the oldest and, back then, the largest and most prestigious event of its kind.
In its heyday, the conference drew crowds of more than 5,000 self-directed investors to the Rivergate Convention Center.
Of course, nothing attracts a crowd of self-directed investors faster than the presence of Gurus.
I don’t mean matted-hair, sheet-wearing Indian fellows lounging in remote caves, waiting for the arrival of supplicants willing to exchange rice and trinkets for muttered wisdoms.
Rather, I refer to a person able to write and speak with great authority on matters related to money and investments. You know you’re in the presence of a Guru when – upon being exposed to their gilded words – you find yourself swept away in a passionate acceptance of whatever thesis they are putting forth and then act upon your passions by placing large sums into the recommended investment.
Gold must rise to $2,000 within six months. Interest rates must spike as surely as night follows day. The Fed’s monetary policy ensures that the dollar will be a smoking ruin any day now. The stock market is poised to crash or set to soar!
These and many similar prognostications are the mainstays of the Guru.
Investment conferences such as the annual fête in New Orleans provide a case study in symbiosis. Simply, as much as the audience wants to sit at the feet of their favorite Gurus, so do the Gurus want to gaze down upon the audience from the elevated stage and pontificate about profits. And not for rice and trinkets, but for fees associated with a wide variety of services related to money management, including newsletters.
Over the course of the nine years I ran the conference, roughly from 1979 to 1986, I played host to pretty much every Guru then walking the earth. Showing how persistent the state of Guruhood is, a number of them still have a following, although the only success they’ve had is of the “Even a broken clock is right twice a day” variety.
The ranks of the old Gurus, culled steadily by the actuarial table, have been filled by new hatchlings of the species who boldly proclaim that they, more than anyone else, have uncovered the “secret” to untold riches or, at the least, investment returns several cuts above what mere mortals can provide.
In the beginning, being an investment neophyte and influenced by the awestruck crowds, I allowed myself to be wooed by the silky prognoses of these high and mighty of economics and personal finance.
But then, inexorably, reality started to sink in. My sense of perspective began to return after an experience involving a friend to whom I recommended a certain Guru – we’ll call him Burt Doh – as a truly exemplary human with the ability to divine the future for maximum investment returns.
A few months later, that very same Burt Doh blew an investment call so spectacularly that readers who followed his advice lost over 50% of their money pretty much overnight. I viscerally recall (as much as one can over a long period of time) deciding at the time to rethink the whole guru thing and, as a result, the proverbial scales fell from my eyes, the fog lifted and my rose-tinted glasses hit the ground.
From that point on, I became an active skeptic of the Guru class. Sure, many were fine fellows (though an equal number were and are little more than charlatans). However, when it came to possessing the crystal ball required to see the future direction of economies and markets, I came to the hard conclusion that the crystal ball was more like one of those Magic 8 Balls you shake in order to view canned answers through a murky window.
“Is the stock market going to go up over the next month?”
To be certain, you might give the Magic 8 Ball another shake and learn:
“Reply hazy, try again”
Which brings me to…
The Truth About Gurus
Consider the words that follow in the same way you might a public-service announcement.
You see, the truth about Gurus is that they’re mere mortals. Which is to say they have good points to their personalities, and they have flaws. Unfortunately, the grander their Guru status, the most enhanced are their flaws.
Louis Rukeyser, at the time of my stint with the New Orleans Investment Conference the grandest of the Gurus, had some very bad habits, including a need to berate anyone unfortunate enough to be called to his service. Hotel clerks, conference registration people, flight attendants, etc. were found wanting and told about it in no uncertain terms. I got along well enough with Rukeyser because I refused to be bullied by him and because he was madly in lust with my first wife, but the more time I spent with him, the less I liked him.
However, in the Guru zoo, he wasn’t the most degraded, not by a long shot. One of the stellar Gurus of the day was in the habit of sitting in his hotel room with a bottle of whiskey, drinking himself senseless and then calling for maid service. When the maid opened the door, she would find him parked naked in a chair facing the door, bottle in one hand and his manhood in the other. Since he was a noted VIP, the hotel would have the courtesy of calling me rather than the police, and I had the pleasure of admonishing him to cease. In the end, he paid me no heed, and the hotel turfed him.
Then there was a silver Guru of great repute, a man who was early to call for silver to go higher but who then failed to remember to sell and so went from a net worth closing in on $50 million to dying penniless. Throughout his career, however, he was a hardcore alcoholic and would fairly regularly pass out face down in his dinner plate.
Another well-known Guru, one whose words of wisdom are still found in the financial media pretty much every day, is so degraded that once, while attending a VIP speakers’ party, he threw himself to his knees between the legs of a female guest he had just been introduced to, shoved his face into her crotch, and made sounds akin to an outboard motor. He then stood up, patted back his brotail and exited the room while the other guests stood speechless.
Humans are a strange lot, and the Gurus I’ve met include some of the strangest of all. But there are Gurus far more dangerous than the depraved and the drunks. I’m referring to those who are ignorant and/or deceitful.
You see, the average investor doesn’t want to take the time required to thoroughly understand how the economy and investment markets really work. They don’t want to figure out the implications of alpha and beta, or the time value of money, or even the basics of risk/reward.
And so they look for trusted sources and find them in the form of the Gurus. In many cases, the Gurus they fall in love with don’t really know all that much more than their audience. Or, if they do possess some reasonable degree of knowledge, they may be sociopaths who use their position of power to fleece their audiences good and hard.
As I’m running long, I’ll give you just a couple of examples.
For instance, one of the leading lights of the financial publishing world, a man who to this day runs a large conference and who has written about a dozen books on the topic of economics and finance, is actually a blockhead who may be able to regurgitate economic theory, but when it comes to investment picking, he’s about as ignorant as the average cab driver. Back when I was in the mutual fund business, I would meet with this individual to discuss some new offering and was always amazed at how juvenile and uninformed his questions were. Yet, even now, thousands of people follow his advice.
Worse, however, are the outright cheats. These are especially prevalent when it comes to the penny stock business. I would name names if I didn’t care about the potential for lawsuits, but I think it’s safe to say that the vast majority of newsletter authors in the penny mining share space are active frontrunners. And by frontrunners, I mean people who do deals to get cheap stock that they then blow out into the market after doing a flamboyant write-up about how the stock is poised to double, triple, or even go all the way to the moon!
I could literally sit here and write for hours and never run out of material about the ignorant and deceitful Gurus that spend every day, inadvertently or deliberately, helping to drain the life savings of their most ardent fans.
But even if he isn’t stupid or a cheat, the average Guru is still responsible for great investment losses. That’s because, per my comments earlier, no one – and I mean NO ONE – actually knows what the markets are going to do tomorrow. Not the fundamentalists and not the technical analysts.
Sure, there are some hedge fund managers and a handful of famous investors (Buffett being the archetype) who have enjoyed extraordinary success over time. But these people don’t make money so much by divining where the market is going tomorrow or the next day, but rather by being geeks with a comprehensive knowledge of the mechanics of investing, as well as having pockets full of money they can use to buy influence and investment talent, and to push markets in their favor.
Some of Warren Buffett’s best trades have come about by him using his name and influence to cut himself a deal with terms so favorable that taking a loss is all but impossible, then using his clout in Washington to sway legislation in the favor of his investment.
That’s an entirely different beast than the run-of-the-mill Guru who reads the Wall Street Journal or who consults a charting service and comes to a firm opinion about where such and such market is headed. And make no mistake, the firmer the opinion, the more dangerous that Guru is to the wealth of his devotees.
The biggest problem in the investment industry is not ignorance; it is the façade of knowledge.
In fact, after decades of observing the Guru class, I have come to the conclusion that the one true Guru was Harry Browne, author of How I Found Freedom in an Unfree World, among other books.
At about the mid-point in his career, when Harry was pretty much at the apex of his Gurudom, he, too, came to the conclusion that no one had any real idea of where markets were going next. Therefore, the right way to preserve and grow capital was not to chase every hot tip or hot market, but to structure your portfolio to enjoy a reasonable amount of upside while protecting yourself against the potential for extreme down moves… and then pretty much leave things alone.
In his view, this “set it and forget it” approach was all most people really needed, and he ultimately engineered it – along with my close friend and associate Terry Coxon – into the Permanent Portfolio Fund. Which, it is worth noting, has performed almost exactly as Harry envisioned all those years ago.
As I just said, Harry came to this realization at the apex of his Gurudom. Thereafter, whenever he took the stage in New Orleans or at any other investment venue, he warned the audience that if they thought they were going to come away from the event with a load of profitable ideas from really smart people, they were deluding themselves.
Within just a couple of years, Harry became something of a pariah on the investment circuit and within the newsletter publishing community. I would always invite him back to speak in New Orleans, out of tradition and because Harry was a friend, but even though he was absolutely correct in his admonitions, his talks became less and less well attended as his audience abandoned him.
They wanted their Gurus and their hot tips, period.
A Closing Thought
Here’s the thing. Most people with a reasonable net worth made that net worth through hard work or by being a member of the Lucky Sperm Club.
Neither of those sources of wealth depends on the owner knowing anything about managing money. Real knowledge in the field of investing falls within the realm of the geeks, the studious sorts willing and able to spend long hours studying the mechanics of money and markets.
It’s natural that people look outside of themselves for advice and help with their money, just as they do when faced with legal matters. Sure, we could play the proverbial jailhouse lawyer, but in the end it’s a lot simpler to hire a professional, and so we do. (Ditto accountants, car mechanics and so forth).
This is not to say that there aren’t good and honest gurus out there (with a lowercase “g”) who may have insights useful enough to pay for. Marin Katusa, my former associate at Casey Research and now the head of his own firm, KatusaResearch.com, actually knows what he’s talking about because he has spent a ridiculous amount of time immersed in all the many corners of the resource sector.
Likewise, Louis James, another former colleague at Casey Research, travels the world kicking rocks on behalf of his readers. Coupled with his unimpeachable integrity, this hands-on approach makes him a good source of information for those of you wishing to speculate in the junior resource mining stocks.
I mention these two not to shill for them – I have nothing other than a personal relationship with either of them at this point – but rather to point you to two people I know in the resource sector who possess the knowledge needed to push the odds in your favor.
But even in the case of Louis and Marin, you have to keep Harry Browne’s warnings in mind. While Louis may know his rocks and Marin the energy sector like the backs of their hands, they can’t know when resource markets will improve or crash – and you need to keep that fact tightly in your mind as you construct your portfolio.
Let me close by stressing, based on my long experience and my many interactions with Gurus and others considered to be “a cut above the rest,” you need to be very, very careful in deciding whom to let into your heart and, therefore, past your inner defenses.
Your favorite Guru is not going to suffer your losses or reach into his pocket to reimburse you when the market he was utterly convinced was going to soar sours instead.
In a future blog post, I will share some useful resources related to portfolio management, but in the meantime, I want to mention a fascinating book I’m currently reading, Street Freak by Jared Dillian. It’s a fast-reading tale of what it takes to become a top Wall Street trader, set against the backdrop of 9/11, the collapse of Lehman Brothers (where he was the head of ETF trading), and Dillian’s literal descent into madness.
If you want to look behind the curtain at financial markets, Jared’s book is a good start.
Until next time…
David “Gump” Galland
David Galland, co-founder and former partner of Casey Research, currently resides in Cafayate, Argentina with his family where he writes the Sendero blog (sendero.ghost.io).