The readers chose Don Hays, of Hays Advisory Group in Nashville, Tenn., as GOTY, but he's going to have to settle for the "People's Guru" award. Hays deserves high praise for recommending investors take a generally defensive posture in 2000 and his persistent warnings until late December that the "bottom" had not yet been felt. Hays' long-term growth accounts gained 17.6% last year and his more defensive accounts were up nearly 23% (both net of fees). GuruVision has consistently found Hays' work thought-provoking, particularly his comparison of the Nasdaq with Japan's post-bubble Nikkei (an analogy the strategist maintains is working). On Tuesday, Hays reiterated a view the markets are currently enjoying an "interlude rally" between the second and third phases of the bear market. The third, or "capitulation phase" of the bear market will begin between April and June and will prove to be the most painful yet for most investors, he believes. Hays was edged out as the "official" GOTY for several reasons:
First, his flip-flop in late December. Just two days after saying the Nasdaq would trade as low as 1800, Hays announced a new rally phase was imminent. Although the call and accompanying expectation that the Federal Reserve would ease prior to Jan. 30-31 proved correct, Hays' about-face left some clients feeling frustrated and abandoned (and his critics gleefully snickering). Second, after recommending a "fully invested" posture on Sept. 5, 1998, Hays suggested investors begin scaling back their equity allocation beginning in early 1999. Missing the blowoff at the end of 1999 and early 2000 isn't a crime. But to not count this against Hays at least a little means you can make a strong case that others who recommended a cautious approach in prior years but got it "right" in 2000 should be the GOTY, notably Doug Cliggott of J.P. Morgan, Rich Bernstein at Merrill Lynch and/or Barton Biggs at Morgan Stanley Dean Witter. Third, and finally, Hays has been increasingly bold in critiquing other gurus lately, which is problematic because GuruVision doesn't need the competition. More importantly, hubris is the deadliest sin.
Excessive pride is one reason another reader favorite, Bob Brinker of Marketimer, need not clear shelf space for a GOTY statuette. In mid-May, Brinker forecast a "bear market rally" and recommended playing it via the Nasdaq 100 Trust ( QQQ). The QQQs rallied sharply thereafter, but the call proved controversial . (Brinker later announced he'd no longer make short-term trading recommendations over the radio.) Brinker's GOTY campaign took a bigger stumble in mid-October, when he (again) forecast a "countertrend rally" and recommended buying the QQQs. That time, the trade itself went awry. In the Jan. 8 issue, the newsletter writer stuck by the October call, forecasting up to 50% gains by the Nasdaq 100 from its Jan. 2 closing low of 2292. That translates into a target of just over $80 for the QQQs, which closed at $53.44 on Jan. 2, or nearly 30% below the original buy target of $75.13, the Oct. 12 closing low. Additionally, Brinker extended the time frame for the rally to three to six months from Jan. 8 vs. two to four months back in October. Regarding hubris, Brinker's only mention of anything wrong with the October call was an acknowledgement his new price target is "slightly lower than the original." (Also, several readers have complained Brinker has sought to stifle criticism, or even discussion of his October call on both his Web Site's chat boards and elsewhere.) None of that changes the fact Brinker deserves kudos for his "macro" call in January 2000, when he revised a 10-year recommendation that investors be 100% in equities, and suggested they raise as much as 60% cash. Finally, it's noteworthy that Brinker and Hays are both forecasting essentially the same thing: Rally now, but big pain to come beginning in late spring/early fall. The GOTY winner, Tom McManus, sees pain now (or soon) but better times in the second half.
The Fine Print
The selection of the GOTY was subjective, based mainly on the strategists' prognosticating but also their visibility and accessibility to the committee (i.e. Task). An absence of the latter meant many otherwise-qualified nominees were either not considered or didn't make the grade. GuruVision is committed to pursuing its soothsaying prowess in 2001, meaning the competition for GOTY of 2001 is going to be even more intense. (Hopefully, the gurus as a group will do better than they did last year .) Sector analysts and money managers were not considered because the former have too narrow a focus and the latter should be busy making money and not prognosticating. Finally, RealMoney.com contributors were not considered because it's too incestuous. To return to the first part of this column, click here.