TIME: Almanac 1993/TIME Almanac 1993.iso/time/050889/05088900.051

Text File | 1992-09-23 | 8.4 KB | 161 lines

                                                                                AMERICAN SCENE, Page 16

Las Vegas, Nevada

Stock Tips and Slot Machines


At a casino, newsletter gurus listen for butterflies

By Richard Conniff


    Outside the meeting rooms of the Las Vegas Hilton, where
2,000 well-heeled stock-market investors prowl for new ideas,
the pay phones are not sweaty with fevered trading. A California
broker ties up one line grousing about a "chisel-wad" client.
The other phones are empty. Nobody's buying.

    It is "Whipsaw City" on the stock exchanges, in the words
of one of the esteemed financial-newsletter editors speaking at
this three-day "money show." Up 25 points Monday, down 20
Tuesday. The common opinion, derived by computer analysis of 50
leading indicators or by going out and staring at the moon,
depending on one's methodology, is that the future looks bad.
The audience of gray and balding heads does not know if the
economy will make a soft landing or a big splat, but for now
they have their assets safely tucked away in Treasury bills and
money-market funds, where the 9% or 10% return makes it O.K. to
be boring.

    So what are they doing here in Las Vegas if, as appears to
be the case, they are also too conservative for the
risk-to-reward ratio of the $25-a-pop blackjack table? They have
come at the invitation of their favorite financial-newsletter
editors, who are still trying to come back from the 1987 crash
and have offered this investment seminar as a
subscription-renewal bonus ("A $500 retail value! Act now! Air
fare and hotel not included"). They are here because they are
eager students of the market, even if temporarily absent from
it, and they are determined to figure the whole thing out, or
find somebody else who can figure it out for them. The
newsletter gurus look to be their best hope. Ralph Campbell, a
retired furniture manufacturer, admits that he subscribes to
eight or ten newsletters, at an annual cost of upwards of
$2,000. "I'm a newsletter junkie," he says, evoking a sigh from
his wife Doris.

    Buck up, Mrs. Campbell, it could be worse. There are 1,500
financial newsletters being published at the moment, and many
of them are on display at the money show: the Astute Investor,
the Busy Investor, the Patient Investor, the Contrary Investor,
the Cheap Investor and so on. Most of them are solo operations,
and one editor describes them unabashedly as the "alternative
press" of the era. The wished-for kinship is not with some Age
of Aquarius tabloid, of course, but with pamphleteers like
Thomas Paine and Alexander Hamilton. The newsletter gurus see
themselves as disabusers of Wall Street myth, as missionaries
of economic truth. Since readers can lose big money if their
guru is wrong, the work is fraught with the peril of being
hanged, though only in effigy.

    Al Frank, who writes his Prudent Speculator in Santa
Monica, Calif., took a turn slowly, slowly in the wind when his
portfolio of recommended stocks dropped 50% in 1987. He
recovered with a 49% gain last year, but the crowd may string
him up yet again. "People think too much about the market," he
tells his audience, comfortable in the subtle distinction that
what he thinks about roughly 14 hours a day is companies, not
market fluctuations. He espouses the solid, old-fashioned idea
of buying good companies cheap and sticking with them long-term,
with the added fillip of using borrowed money to maximize
returns. Right now he is margined up to his Adam's apple, being
just about the only person in the house who still thinks the
market's heading up. People regard him with a fascination and
solicitude otherwise reserved for a condemned man on the
gallows. "It will happen, it will happen, it will happen," a
short man with a German accent warns him, "but this time it
won't be the Fed, it will be the Japanese stock market. I'm
talking about panic." Frank concedes mildly that this is
possible, but says it is unlikely.

    Frank is about as far as you can get from a pinstripe,
commission-driven Wall Street professional, which is probably
why his readers like him. He is a former professor of
philosophy, carelessly dressed, with watery blue eyes and a
fleshy, houndlike face. He is still doing penance for his 1987
performance, having vowed not to smoke another cigar till the
Dow Jones average tops 2722. He tends to dwell on his losses,
even though he started out with $8,000 in 1977 and by taking his
own advice has boosted it to $422,000. Charles Allmon, a rival
newsletter editor, suggests that Frank is a ringer, a "riverboat
gambler" suitably disguised by self-deprecation and a digressive
academic manner. Frank replies that Allmon, who has lately kept
his portfolios in cash, just can't handle the action anymore.
He's got "gun-shy." Las Vegas is not big enough for both of
them.

    The money counts, of course, but perhaps not so much as
puzzling out the future and proving that everybody else has it
wrong. Charles Githler, who is sponsoring this money show,
captures the visceral quality of the obsession (though with a
blithe disregard for mixed metaphors) when he introduces the
editors: "They'll really spill their guts. They'll put their
necks on the line, and then let you fire back with your
questions."

    The marketplace being a multilayered and ever more
convoluted place, there are newsletters that devote themselves
solely to scrutinizing other newsletters' performances. Stan
Weinstein, who edits the Professional Tape Reader, is still
bleeding from one such analysis, in which the writer likened his
record to that of the Suzuki Samurai. "Stan's not always right,"
he tells his audience. "I'm not saying, `Follow me across the
river, this is Moses.'" He just wants them to think with him.
What he thinks about are the elaborate, hand-drawn charts that
fill his filing cabinets and cover every wall of his office.
Weinstein runs his hands over these charts like a sorcerer,
working most nights till dawn. As a technical analyst, he does
not care about good companies or bad. When a reader advocates
Apple Computer, he replies, "You're right, it's a great company.
You're right, it has good earnings. You know what? Sell it." For
Weinstein, price patterns tell all.

    Weinstein is a popular speaker, a motormouth with a New
York City accent and a concise choreography of hand and facial
expression to convey such messages as "gedoutta-heah-gimme-a-
break." He wears tailored suits and a gold bracelet with STAN
spelled in diamonds. His admirers are legion. "I'd be lying if
I said I didn't love it," he says. "One time we were flying in
from Europe, and we had 40 minutes to get through Customs at
Kennedy and make our next flight. The Customs man said, `Are you
Stan Weinstein? I saw you on Wall Street Week. Do you still
like Mobilhome?' I said I still liked Mobilhome, so he raps on
the suitcases, done-done-done, and he yells out, `Hey, the guy's
gotta make a flight!'"

    The crowd picks through the offerings carefully, learning
something about what makes Al Frank and Stan Weinstein and
possibly also the market tick. They search for revealing new
indicators or for an unknown face who has it all figured out (a
hidden imam, in the jargon). They browse among new ideas, like
one newsletter's espousal of the "butterfly effect," the chaos
theory that a hurricane in the Caribbean may be caused by an
unknown butterfly flapping its wings six months earlier
somewhere in Brazil, and that, by analogy, there are no hidden
imams because it's all too complicated to figure out. They
listen for reliable word of when the market's going to turn
(this is what people really want from newsletters, says an
editor, the chance to pat a neighbor on the back and say, "I got
out, you poor slob"). They listen for the sound of butterfly
wings flapping.

    Then they go home and mull it over till the next big
conference, which happens to be in June in Monte Carlo
(admission $695, and no freebies). The title, "How to Profit
from a World on the Brink," suggests several interesting
possibilities: a) starting a financial newsletter; b) playing
host to an investment conference and bringing in dueling
newsletter editors for entertainment; c) before you subscribe
or attend, locking up all your money in a certificate of deposit
at 10%; or -- and we have to admit we like this one best,
diversification being a very big idea in the investment world
-- d) all of the above.