Making Consistent Investment Gains is Not An Easy Task:

This month's experience was a painful reminder of how difficult it is to make gains on your invested capital. There are other reminders all over the place. Real estate was a way to make steady gains for many years, and then it wasn't. Treasury bills are being sold for zero percent interest - and that is surely a loss because inflation will eat away at the value of the investment that yields nothing.

Every December, Smart Money magazine publishes a lead article entitled "Where to Invest in (Next Year)". Every year, they consult the top analysts they can find to help them come up with a list of the best investments for the coming year. For each company, they give a summary of the often-compelling reasons why that stock is sure to soar in the coming year. I have often been tempted to buy the stock in every one of the 12 or so companies they recommend to spread my risk (but as you know, I resist the temptation and still do not own one share of stock of any company).

I decided to look back to see how the Smart Money selections for 2008 worked out in the real world. Of course, 2008 was a bad year for stocks. For the Smart Money "year" (December 1, 2007 through November 30, 2008), the S&P 500 fell by 40.8%. The Smart Money portfolio did even worse, falling 53.6%. One of the selections fell by 94%. Imagine! These were the 12 best companies that the top analysts selected as their best bets for 2008. A monkey throwing darts at the Wall Street Journal would have randomly selected 12 stocks that did better than those chosen by the experts.

If the smartest financial people out there, those with billions of dollars of other people's money to invest, with all their research capabilities and inside information, can't outperform the monkeys, how can ordinary investors like you and me expect to do better?

At least the people who did mirror the Smart Money portfolio only lost a little over half their money last year. They could have put it with Bernard Madoff's company and lost it all.

Once again, I am convinced that the Mighty Mesa Strategy as it is currently configured, is the best alternative for long-term investment gains for most of us. True, we had a bad month last month. It was especially bad because we were so far ahead at one point. Bad months happen. The prior month saw almost as great gains as we had losses this month. For the two-month period, we have suffered about a 1% composite loss. The same cannot be said for most stock market pickers, for Smart Money followers, or for investors in Mr. Madoff's ponzi scheme.