Over the last several months we’ve seen several ads touting Steve Sjuggerud’s True Wealth Systems, which is apparently a big quantitative screening “supercomputer” that Steve subcontracted to some computer programmers — and which is supposed to identify investing anomalies that he can then write about to his subscribers, who then will profit.
And I can’t tell you exactly what the system is, or how it works — there are a zillion different quantitative systems out there, and they form the basis for thousands of hedge funds, among other investment vehicles. This broad investing idea encompasses not just the hyperactive “high-frequency trading” stuff that is rightly criticized (I think) for increasing volatility to no good end, but also the more traditional “quants” who sift and search through mountains of historic data and attempt to mine valuable causality and predictability from the seams of company and stock data.
Lots of folks do this — it’s effectively quite similar to what Loui Navellier has done for years, using earnings momentum, analyst surprises, valuation and similar metrics to quantitatively winnow the best stocks from the herd in a way similar to the Investors Business Daily CanSLIM technique … and earlier “quants” like Jeremy Grantham pioneered the use of computing power to create predictable stock picking, though those quant models have been often tinkered with and, in many cases (particularly if they become well-known or heavily followed), rely on a human being to wave a yellow caution flag at some point along the road … lest the model drives everyone into the same wall at the same time.
So anyway, that’s the idea — mine the history of company filings and stock trading (and other stuff, including currencies and interest rates in the mix, but mostly company and trading info) to find out what patterns indicate profitable sector, market, or stock bets ahead.
And Sjuggerud is telling us he’s developed one — but as I said, other than the fact that it’s using data feeds from a lot of sources and required the work of a bunch of Belarussian programmers, I have no idea what his quant system is. We know from his past True Wealth and Daily Wealth commentaries that he’s a thoughtful guy who likes to look for the magical indicators and contrarian signs that promise riches ahead, and he’s got at least some academic chops (doctorate in finance, he reports) to sift and sort the data … but I dunno what his system is and he ain’t telling (unless you subscribe, list price $3,500). Probably, truth be told, he’s working with lots of different “systems” that might be effective for different sectors or investment types — we do, at least, know that he’s not doing any of the hair-trigger trading that is so difficult for individuals to reproduce, his system reportedly produces monthly indicators and monthly recommendations … just right for a monthly newsletter, no?
But don’t despair! We do have something for you today — we don’t know the system, but we do know at least one of the “anomalies” he has found that he thinks will be profitable for the next couple years. He didn’t tell us what it is, of course, but he hinted and teased just enough that we can get you some facts … let’s walk you through some of the ad first.
Sjuggerud’s pitch is all about the “Great American Paradox” — here’s how he introduces it:
“The Great American Paradox of 2012
“I believe I know just what’s going to happen in America over the next two years.
“It’s the complete opposite of what most people expect, which means there will be opportunities for incredible gains… and devastating losses.”
So he’s way, way ahead of me — your friendly neighborhood Gumshoe does not have any idea what’s going to happen next week, let alone over the next two years. Except I’m due to put some bleach in the water filter, and one of the little Gumshoes has a doctor’s appointment … so those are high-degree-of-probability events.
The background for all of this is that yes, Sjuggerud agrees with much of the pessimism out there, particularly as it relates to the consequences of US debt and money-pringint … here’s how he puts it:
“The dollar is losing value. Unemployment is sky-high. Our government’s credit rating has been downgraded, and the economy is generally a mess.
“I believe that eventually, all this money-printing, the bailouts and unfathomable debt will have devastating consequences for hundreds of millions of people in this country.
“But here’s the unexpected thing…
“After studying 33 similar situations in both the United States and other countries over the past 150 years, I have found that there is an unusual phenomenon about to take place, which could provide a simple and safe way to make an extraordinary amount of money over the next 18 months.”
That “unusual phenomenon” is the “Great American Paradox of 2012” …
“What’s most amazing is that although this paradox repeats itself unfailingly throughout recorded history… it’s completely overlooked while it’s happening – because nobody can believe it could actually be taking place.
“That is why I must warn you…
“What I am about to tell you is controversial. It goes 180-degrees against conventional wisdom… And it goes against almost everything you may believe is happening at this very minute.”
Oohhh, gives you little shivers down your back, don’t it? Nothing makes us feel as lovely as going against conventional wisdom.
And better yet, we’re going to make lotsa money!
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“Yet, I think it’s also a very safe and conservative way to make serious money. I’m talking about gains of well over 100%, in a matter of 10-12 months, without touching options or anything risky like that. “
He then runs through several charts and examples of what he means by this paradox — which I think I can sum up as, “even when the economy goes into the outhouse, some stocks go up.”
Yes, that’s simplistic, but that’s what I get from his examples — he talks about a few select consumer staples stocks that surged during the Great Depressi