The Physician Investor Newsletter- A Review
A couple of months ago I contacted Dr. Robert Doroghazi, a cardiologist who writes about investing, about obtaining a copy of his 2009 book, The Physician's Guide to Investing. He declined to send me one, but offered to gift me a free three-month subscription of his investment newsletter if I would review it on this site. This is that review. I have not yet read the book, but am hoping to get my hands on it in the near future, along with several other books on investing and personal finance directed specifically at physicians. I have no financial relationship with Dr. Doroghazi, and receive no kickback if you sign up for his newsletter. (Although if you purchase his book through links on this page, I get a 4% commission from Amazon.)
First, a bit about the newsletter. He sells the newsletter via his website for $75 per year, with a huge discount for students ($10) and residents ($25.) You too can get a free three-month subscription by signing up on the website. Also, all newsletters older than 30 days are supposedly available free of charge on the website, although in reality the last one published there is from May, more than 3 months ago. In the last two months, I have received 14 different email newsletters as part of my subscription.
Second, a bit about newsletters in general. Our younger readers may not be very familiar with the concept of an investment newsletter. Think of it as a blog before the internet existed. Every couple of weeks you would receive a letter in the mail that told you what to invest in. When to buy, when to sell, what was going to happen in the future, etc. Rather than being supported by advertising, newsletters are supported by subscriptions. The overall track record of market-timing newsletters is poor, like the record of market-timers in general. Mark Hulbert publishes a newsletter analyzing investment newsletters. Time after time he has shown that only a small percentage of newsletters “beat the market” in any given time period. Over a 17 year period ending in 1998, for instance, less than 10% of the 57 newsletters he was tracking managed to beat the overall market. Sure, you say, but that was during a great bull market. Well, fully a third of them didn't even beat the risk-free rate of return of 5% over that period, which was probably the biggest bull market this country will ever experience (the market had 12+% returns in that time.) To make matters worse, he has found that about half of the newsletters went out of business completely. Like mutual funds with poor track records that simply disappear, survivor bias is a real concern among newsletters. Armed with this data, I'm always a bit skeptical of newsletters. I much prefer books. In my opinion, quality investment advice doesn't change week to week, month to month, or even year to year. There is nothing wrong with periodic reminders of good advice, but the idea that you need to constantly know what the market is doing to be a successful investor is foolish.
Third, a bit about Dr. Doroghazi's investment philosophy. The newsletter began several years ago, but I only have access to newsletters on the website back to April 2010. I would best describe his philosophy as a chart-following, macroeconomic goldbug. Nearly every newsletter I've received advocates taking a large position in gold, whether through actually holding the physical metal or through proxies such as the ETF GLD. He believes we are in a “long-term secular stock bear market” and in a “long-term secular precious metals bull market.” A recent letter stated it this way:
“There is not enough gold. You must invest in the precious metals, with the core position of your entire investment portfolio being physical gold in your personal possession….It is not too late to buy”
He frequently posts short term charts discussing trends and “technical” factors such as support levels and moving averages. He enjoys discussing current political and economic news and advises portfolio changes based on them.
Now, any time you are looking at market timing advice I find it more useful to go back in time and look at the old advice and see how that turned out, rather than trying to determine if the current advice is any good. Let's go back a year or so and see how things worked out.
April 2010- He advised subscribers to decrease their bond allocation, increase their stock allocation, shorten the maturity on their bonds and buy precious metals. It's now been 17 months. How did this advice work out? In the last 3/4 of 2010, bonds (we'll use Vanguard's Total Bond Market Index as proxy) returned 4.73% and so far this year they have returned 6.22%. That's pretty good performance in my book. Inflation-protected bonds are up about 18% since he told subscribers to get out of bonds. Through the retrospectoscope, it appears that decreasing bond allocation probably wasn't very good advice. What about increasing your stock allocation? Well, over the same time period stocks (using Vanguard's All-World Stock Index Fund) have gone down about 1.5%. Now, 17 months isn't a very long period of time, but so far the advice to increase your stock allocation turns out to also be poor advice. Let's look at the third prediction- shorten your bond maturity. Let's compare the performance of short-term bonds to long-term bonds over the last 17 months, again using Vanguard Index Funds. The short term bonds are up 5.5% and long-term bonds are up about 24%. Now, the final piece of advice- buy precious metals. Let's use GLD as our proxy. Since April 2010, GLD has gone from $110.26 a share to $177.67, an increase of 61%. That turned out to be pretty good advice, but still, he's 1 for 4. Flipping a coin would have turned out better. But he is quick to remind subscribers over and over again about when he is right, not mentioning he has been wrong with other advice. We won't know for a while if his recent advice to keep buying gold is good or not, but given the past record, I certainly wouldn't bet the farm on his advice.
May 2010- The newsletter states this:
Cash is king. There is nothing wrong with being completely out of this market, in 100% cash….In my personal portfolio, I have no long positions outside the precious metals
Wait….a month earlier you were telling us to limit our exposure to fixed income and increase our stock exposure. Now you tell us you don't actually own any stock? Then he goes on to say this:
As I have explained in multiple notes over the last few years, secular bear markets, such as we are experiencing now, show in spades that buy and hold is a myth. When in doubt, get out; there is still time. There is nothing wrong with a large, even 100%, cash position.
So, before the market goes down, he advocates loading up on stocks. Then, after it goes down, he advocates getting out of the market. That sounds an awful lot like buy high, sell low to me. I find it noteworthy that from May 20, 2010, when this advice was given, to the end of the year, stocks returned about 18%.
I don't point these things out to somehow show that Dr. Doroghazi can't predict the future. I show them to point out that none of us can predict the future. All these recommendations he made were the conventional wisdom 17 months ago. You'd see these same ideas on web forums, blogs, CNBC etc. But that doesn't make them right. As I've mentioned before, you need an investment plan that doesn't require you to have a crystal ball. Investing with your emotions based on current news can be a recipe for financial disaster.
There are a number of things I like about the newsletter. He speaks specifically to physicians. I find it helpful to get advice from a person who knows what I've been through and am going through. As a general rule, I find physicians far more trustworthy than the typical Wall Street professional. He gives lots of good personal finance advice, (limit your debt, spend your money wisely, buy quality items, don't co-sign notes, avoid scams etc), and includes personal stories from subscribers that make these principles come alive. The newsletter isn't really very expensive either, particularly for those still in training. I mean, I'm probably one of the cheapest investors out there, calculating my investment expenses out to the dollar every year. But $10-75 a year isn't going to break the bank. Also, his recommendation to buy a lot of gold the last few years HAS been spot on. That doesn't say anything about the future, but I have to give credit where credit is due.
However, I have a hard time recommending the newsletters without reservation for the reasons already discussed above. Basically, I disagree with his investing philosophy. (Learn more about mine here.) I find technical analysis useless, market-timing foolish, and predicting the future impossible. I also find a large allocation to precious metals to be unwise, no matter how well it has performed recently. I also don't feel there is a need for an investor to stay “tuned in” to political, economic, or market news. It is very difficult to keep a long-term perspective when all you see are short-term fluctuations. So, I'm basically against the whole concept of an “investment newsletter” where a guru tells you how to invest based on recent news or market activity. I don't have a problem with an investor paying for advice, but bad advice will cost an investor dearly, no longer how little he pays for it.
In conclusion, it costs you nothing to try this newsletter out. Head on over to his site and sign right up for a free three-month subscription. Pay attention when he talks about personal finance. But when he starts talking about extreme portfolio changes, timing the market, and technical investing, I suggest you take that advice with a large grain of salt, just like anything else you might hear in the physician's lounge.
(This post was written 8/23/2011 so return figures are accurate as of that date.)