Sometimes the numbers are just wrong.
I was recently asked about the Gone Fishing Portfolio. There is an entire books dedicated to this portfolio, although I admit I haven’t read it, and I may never read it. I don’t mean to be dismissive, but if I read every financial book like this that is pumped out it would consume every waking hour I have.
From what I understand, there is nothing “wrong” with the portfolio. But it isn’t any sort of breakthrough in financial management. It is a globally diversified portfolio with a small cap and value tilt. It has done quite well since 2000, but that is exactly what you would have expected from a portfolio with this composition. I expect it has massively under performed the S&P 500 in 2013. Again, nothing wrong with that, as I wrote in a previous post. You just have to understand what you are buying, knowing that sometimes it will outperform and sometimes it won’t.
Straight up wrong numbers posted
But I did happen to notice they have some incorrect numbers posted on their home page. They post the return of the S&P 500 in 2011 as 0.0%. This was the return of the price level of the S&P 500, but if you also count the dividends as return then it was 2.11%. They also have the returns in 2009 listed as 23.4%. The S&P actually returned 26.46% in 2009. I am guessing the discrepancy is also due to dividend return.
What is most odd, however, is that all their other returns in the grid include dividend returns. How could they have included dividends as returns in all the cells on their grid except for two? I have no idea.
Really? How could they make a mistake like this?
When I pointed this out to the person who had asked me about the portfolio, he was surprised. These guys have a book. They have 400,000 subscribers. How could they make such a crazy error on their home page?
Believe me, this sort of stuff happens much more than you think. For starters, the Gone Fishing Portfolio is being marketed as some sort of great solution when it is just a globally diversified small and value tilted portfolio. Are they deceiving the public purposefully? Actually I don’t think so. They just don’t understand investing enough to truly grasp that they haven’t come up with anything new. This happens all the time. Don’t believe me? Well, would you have believed that they could be so sloppy as to straight out publish the wrong numbers for the return of the S&P 500 on their home page? And yet there it is.
It reminds me of the time I asked Robert Arnott about a “negative value premium” on a Schwab conference call and he clearly had no idea what I was talking about. This is a giant of the industry and he doesn’t even understand basic concepts.
William Bernstein, who actually does understand this stuff…much better than even I do, has written about how grossly uneducated and uninformed most people are in the investment industry. It is frightening but true.
Public exposure does not equal knowledgeable
What is my point in all of this? Just because someone in the financial industry writes a book, or gets in a magazine, or gets some TV airtime, or even has billions of dollars under their management, doesn’t at all mean they really have any idea what they are talking about. Don’t assume that publicity equals competence.
Photo by lokieduc8