Jay O'Keefe's Investment Letters

Letter 3     
October 29, 2007

Whom To Listen To

(Updated July 3, 2012)

I managed the investment portfolio of Western National Life Insurance Company from 1960 to 1986, the year I left the corporate world. After that I began managing retirement money for myself and a few friends and family. By the late 1990s I began to realize that I did not have the wisdom, knowledge and expertise to excel, even though I had had years of experience and research. In 1999 I committed the entire project to God, took up a prayer vigil, and asked Him to lead me to the experts whose knowledge, advice and counsel I should listen to in order to succeed. I further told my ¡°clients¡± that if we had a bad year, I would discontinue the project. I believe the list, which follows, is the answer to my prayers. Occasionally this list changed slightly mainly because I discover a new expert, or at times any given expert will be of less value to me than at other times. Most of the important names have stayed the same since the beginning. After forty years of seeking to learn to invest, I have found only a few people in whom I have any significant degree of confidence. Here is my current list. It has gotten shorter since the last update. I have not given up on all of those dropped from the list, but I have decided not to mention them here.

My Top Experts 
(Arranged in order of their current value to me)

1. Chris Weber is one of the writers for the Stansberry Research group. He is in his 50s, I believe. He writes The Weber Global Opportunities Report (published twice monthly, $249 per year,  http://www.weberglobal.net). I kept hearing comments from the other writers for Stansberry Research, like this one, ¡°If I had to pick one person to manage money for me, Chris would be that person.¡± I decided to give him a try. I am learning from him.

2.Ted Butler (over 60 years old). The best silver analyst I know of. His superb 25 years of silver research have been of great value to me. Until about a year ago, his essays were free, but he now charges $34.95 per month for his service (http://www.butlerresearch.com). He usually publishes two or three essays per week. I can¡¯t imagine being without this information. Because of the high allocation I have to silver I presently consider him my most valuable expert.

3. Jim Sinclair (around 70 years old). Probably one of the world¡¯s best experts on gold. Writes excellent free editorials and brief comments on daily financial news at http://www.jsmineset.com. I've been faithfully reading his articles for years. His web site is only 5 or so years old. You will find that he writes every day, except when he makes occasional trips. Even then, he often still writes. He is one of several writers on the web site. He has been a gold trader all his life, taught by his father, one of the greatest traders of all times. He has an incredible knowledge of financial history. He's probably one of only a hand full of people who completely understand derivatives, warning more than ten years ago they would cause a financial calamity some day. No one I am aware of has even approached his forecasting record on gold, as well as the whole financial picture. He claims to have 150,000 readers.

Harry Browne (Deceased 2006)

Harry Browne was one of the best investment minds of the twentieth century. His first book, How You Can Profit from the Coming Devaluation, published around 1970, has become a classic and was what I read around 1974 that first introduced me to the classical or ¡®Austrian¡¯ economics model, which I believe is much closer to what the Bible teaches than the popular Keynesian economics model. He predicted the devaluation of the dollar, the continuing debasement of the dollar through monetary inflation, and the importance of including gold as part of a diversified investment portfolio. His last book, FailSafe Investing, was published in 1999. It is short, very easy to read, and is presented in the form of ¡°the 17 simple rules of financial safety,¡± including rule 11, ¡°How to establish a diversified portfolio which will protect your money in all economic environments.¡± As this is written, the latest revision of this book may be downloaded from http://www.harrybrowne.org for a very nominal cost. I cannot imagine a better value. In 1982 he started a mutual fund which follows the strategy outlined in rule 11. It is still in operation and has gained over 9% per year average return since its beginning. Information on the mutual fund is available at http://www.permanentportfoliofunds.com. This book could be the single most important book you will ever read on investing, an absolute must read in my opinion.

Important - The Bottom Line

WARNING: Beware of any newsletter with less than a ten year documented track record. Mark Hulbert, publisher of Hulbert Financial Digest, has been tracking the results of several hundred newsletters for at least the last 25 years that I know of, maybe longer. He has no relationship to any newsletter and uses the same calculations and formulas on all. You can check the record of any newsletter by going to his link on http://www.marketwatch.com.

Also beware of any stock picks from newsletters which quote performance figures but do not make specific buy and sell recommendations giving the date and price at which they could have been executed following publication of the recommendations, and continuously following every recommended investment until it is sold. Anything short of this is not a complete track record and can be misrepresented and dangerous. Such newsletters are notorious for citing some of their great calls, after the fact, while conveniently remaining silent about their not-so-great calls, and certainly not showing an overall portfolio result which includes all recommendations over a protracted period of time. 

The main objective of 99% of the newsletters is to sell newsletters, not make you rich. If they could make you rich, they¡¯d be rich and wouldn¡¯t need to sell newsletters. Admittedly, this is a generalization, and there are a few rare exceptions, but not many (see last paragraph below). Here¡¯s a quote from Richard Russell worth thinking about.

¡°In my half century in this business, I¡¯ve never seen an investment service that can pick stocks and consistently generate profits for its participants over time. And the reason is just common sense. If such a service existed, if the service could actually produce consistent profits over time, then the owner of the service would almost surely keep his system strictly to himself. He¡¯d be crazy to disclose his methods. Furthermore, news travels like lightening on Wall Street. When investors saw that this remarkable service produced consistent profits over time, the service would quickly gather an enormous following, and when that happened, the service¡¯s stock methods and stock picks would be known by thousands of investors and immediately be discounted.

¡°Think about this ¨C Warren Buffett is considered to be the greatest investor in modern history. Does Buffett announce his next purchase in advance? Does anyone know where Buffett is going with his money next? Of course not. Do any of the great Wall Street traders announce where they¡¯re going next? They¡¯d be stupid to do so. They keep their ideas to themselves.¡± 

It is my opinion that the same thing applies to recommendations which come from brokers. I have never gotten consistently good results using them. Even if you do make a profit, over time it will usually be lower because when an individual broker is involved, the commission you pay is high. Most younger brokers are in training, and are required to ¡°push¡± the stocks their firm is seeking to sell. Thus, most of their recommendations will be to buy, not sell. Although there will be an occasional rare exception, when an individual broker becomes good enough to make you an exceptional return (in spite of the big commission), he can often do much better on his own, and will likely move on.

IMPORTANT WORD OF BALANCE: I do not have the right, data or wisdom to judge any specific broker, firm or newsletter, so I try very hard never to do that. Many of them are my friends and I value their friendship. They have their place in our free enterprise system, or they wouldn¡¯t be there. If you catch me criticizing any specific person, please rebuke me. I am simply sharing a strategy which I believe the Lord has given in answer to prayer. Since I turned it over to Him, He has given us 11 good years in a row. We may be enjoying our last good year as this is written. He¡¯s not obligated to continue prospering the strategy. That¡¯s one reason the discussion on risk profile is so important. I believe patience and humility are the two most important qualifications for successful investing. I sincerely request your prayers for me.

CLOSING COMMENTS: Not all of you will want to do a lot of reading or study. Some of you will invest 100% in the Permanent Portfolio, and won¡¯t need to. Some will find other investment advisors you trust. And some will do little or no investing at all because you are investing all your energy and resources in your own business or profession.

But some of you will be serious about wanting to learn how to invest. To you I say begin reading and studying the men in my list of experts. For those who charge for their material, I believe they are worth every penny you will pay. Read their back issues for the last two or three years. Then read everything you can find spoken or written by Jim Rogers. He has a heart for helping the average investor (little guy). And above all, read his book Hot Commodities.

Without counsel purposes are disappointed: but in the multitude of counsellors they are established.
Proverbs 15:22

Is not wisdom found among the aged? Does not long life bring understanding?
Job 12:12 NIV

The quiet words of the wise are more to be heeded than the shouts of a ruler of fools.
Ecclesiastes 9:17 NIV

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The information in these letters is the responsibility of Mr. E. Jay O'Keefe, but all your decisions are your own responsibility.

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