TIME: Almanac 1990/1990 Time Magazine Compact Almanac, The (1991)(Time).iso/time/050889/05088900.051

Text File | 1990-09-18 | 8.3 KB | 144 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.