The "Fat Pitch" & Miss

Tyler Durden's picture

Authored by Lance Roberts via,

While I remain long and invested in the markets on behalf of my clients, I focus and write about the significant risks that are currently present. I am fully aware a laissez-faire attitude towards these risks is ultimately likely to destroy large portions of my clients hard-earned, and irreplaceable, investment capital.

Note: Myself, and everyone that writes for Real Investment Advice, do so under our actual name. We pride ourselves on our transparency, and our responsibility, to all that read our work. We value our loyal following and work diligently to improve upon the original ideas and research we share.

This past week, I was treated to a chart from “The Fat Pitch” blog, by Urban Carmel, which took several pieces of my previous writings out of context to try and suggest that I somehow had “missed the market.”

“Yet, throughout this period, investors with even a passing interest in financial news have regularly seen commentary from experienced managers that the stock market is highly likely to plunge now. The irony of equity investing is this: if you knew nothing about the stock market and did not follow any financial news, you have probably made a very handsome return on your investment, but if you tried to be a little bit smarter and read any commentary from experienced managers, you probably performed poorly.”

While I certainly appreciate the “buy and hold” crowd trying to justify why you should just take a blind approach and hold on for the ride, I struggle because I am all too aware when market shifts occur, as proven in 2000 and 2008, years of gains can be wiped out in months.

By taking commentary out of context from the managers noted above, it misses the actual investment management process being undertaken by myself as well as some of the other individuals listed. What he left off the chart above from myself are prescient market calls such as:

  • December 2007:  “We are, or are about to be, in the worst recession since the ‘Great Depression.'”
  • February 2009: “Here are 8-reasons for a bull market.”
  • March 2012: “Coming This Fall, The Best Time To Invest”
  • March 2013: “Time to get out of Gold.” 
  • June 2013: “Pimco says bond bull market is over, I say it is still alive”
  • April 2014: “Time to get out of Energy.”
  • August 2015: “Why This Time Could Be Different” (Warned of the coming 2015-16 correction)
  • October 2016: Technically Speaking: 2400 or Bust

You get the idea.

And yes, as noted in the chart above, I did warn about things that didn’t come to pass, such as the correction in 2015-2016 was only a 20% decline, and despite plenty of economic evidence which suggests it was a “mini-recession,” it was never officially labeled that way…yet.

So, I was wrong. I apologize.

Importantly, however, by reducing equity risk during the 2015-2016 period, I saved my clients the stress of the decline and preserved their investment capital which was reallocated back to the equity markets when the correction passed.

There have also been times along the way that portfolios I manage were underweight equity when, in hindsight, completely ignoring risks, would have provided a slightly better rate of return. That too, is an acceptable outcome given the potentially devastating consequences. Successful investment professionals must adhere to discipline and respect one’s evaluation of risk, even at the cost of missing some upside.

That is what “managing a portfolio” means, and also why client’s pay me to do it.

If simply “buying and holding” an index is indeed the way to manage money, as suggested by Carmel, then why would you ever “pay a fee” to someone to do that for you? You can do it yourself from roughly 0.25-0.30% at Vanguard.

You Don’t Have The Time

The reason this is so important, as I have exhaustively written about, is the math of loss, and time

While writers like Urban Carmel, and many others promulgate the idea of “buy and hold” investing, they misunderstand, and more importantly dismiss, the mathematics of the investing cycle despite claiming an “evidence based investing” approach.

To wit from Urban Carmel:

“In the past 193 years, US equities have suffered an annual loss greater than 20% just 9 times, a “base rate” of 4.7%. The “base rate” is the probability you would assign to an outcome if you knew nothing other than how often it was statistically likely to happen (from”

Now, those statistics are absolutely right. The issue is that looking at percentages is incredibly deceiving. Being up 80%, and then down 50%, doesn’t leave you 30% ahead, but rather 10% behind. More importantly, you have lost precious time, often measured in years, in your wealth accumulation process. As I previously discussed in “The World’s Most Deceptive Chart.” 

“The first chart shows the S&P 500 from 1900 to present and I have drawn my measurement lines for the bull and bear market periods.”

The table to the right is the most critical. The table shows the actual point gain and point loss for each period. As you will note, there are periods when the entire previous point gains have been either entirely, or almost entirely, destroyed.


The next two charts are a rebuild of the first chart above in both percentage and point movements.


Again, even on an inflation-adjusted, total return, basis when viewing the bull/bear periods in terms of percentage gains and losses, it would seem as if bear markets were not worth worrying about.”

“However, when reconstructed on a point gain/loss basis, the ugly truth is revealed.”

This was a point Michael Batnick addressed, but dismissed:

“However, ‘stocks usually go up’ also implies that sometimes stocks go down, and sometimes they go down a lot, which is supported by the *chart below. This is why it can also pay for financial pundits to play on the bearish side. Usually they’re wrong, but when they’re right, they get to say “I told you so.” They saw what few others did, and this can provide them with an open invite from the media for the rest of their career.”

“The fact that stocks usually go up makes permabulls look like idiots once in a while and permabears look like geniuses once in a while.”

What Michael misses is that while markets DO rise the majority of the time, the drawdowns that follow wipe out a large chunk, and sometimes all, of the previous gains.

No Excuses

For actual portfolio managers, it is never about being able to say “I told you so.” 

It is about NOT having to face a client who are in, or near, retirement and trying to explain how the loss of 20, 30 or 40% of their capital will eventually come back.

Why should the client be upset they just witnessed a significant chunk of their life savings vanish? The mainstream “buy and hold” crowd will simply rely on the excuse:

“Well…NO ONE could have seen that coming.” 

Not only is that oft-used comment simply not true, it is complete negligence of their duty as the clients fiduciary.

Me…I am no one important. I run a small portfolio of clients in Houston and simply write about what I am doing for them. However, there are many very smart managers from Ray Dalio, to James Grant, Jeremy Grantham, Howard Marks, Mark Yusko, Jesse Felder, and Michael Lebowitz all suggesting “something wicked this way comes.”

You have been sufficiently warned.

It may not be today, next month or even next year.

“Bull markets are built on optimism and die on exuberance.”

But they all die. Simply ignoring history won’t make the damage any less catastrophic

Of course, given that investors are just “mere mortals” and do not have an infinite amount of time to reach their financial goals, the end of bull market cycles matter, and they matter a lot.

While “perma-bulls” may enjoy taking stabs at portfolio managers that take their risk management and capital preservation responsibilities very seriously, it should be done without taking those comments out of context.

Have I warned of risks in the markets?


Does that mean I have somehow been sitting in “cash” this whole time and “missing out?” 

Absolutely Not.

Every single week I publish a newsletter on our site which updates our risk management analysis and exposure model. The model adjusts equity risk relative to the price trends and risks prevalent in the market. As you will notice, more often than not, the risk reduction provided protection against declines, protecting capital and reducing volatility. (If you would like access to it to see for yourself CLICK HERE and it will be in your inbox next week.)

I have constructed an analysis of the model above showing a 60/40 stock/bond allocation risk-adjusted as compared to just “buying and holding” an index.

To date, the “buy and hold” crowd still have not made up for the ground they have repeatedly lost along the way. Sure, they made money, but not as much as by just simply managing risk to some degree along the way with significantly reduced volatility.

Importantly, we are all trying to predict the future. No one will ever be right all the time.

Lord knows I have more than once in my career written a “mea culpa,” and I am sure that I will write many more before I am done with this business.

However, what I will never have to do is look at a client across my desk and tell them “not to worry” about the 40% decline in their portfolio.

Yes, you will eventually get back to even if you don’t die first. But, getting back to even is NOT the same as achieving your financial goals.

Chasing an arbitrary index that is 100% invested in the equity market requires you to take on far more risk than you most likely want or can afford. Two massive bear markets over the last decade have left many individuals further away from retirement goals than they ever imagined. Furthermore, all investors lost something far more valuable than money – the TIME that was needed to reach their retirement goals.

But when you begin to see and hear the excuses of:

“Well….no one could have seen that coming.” 

Just remember, you deserve better.

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Ramesees's picture

To be frank - ZeroHedge has been predicting a crash since 2009 too. They’ll eventually be right, of course, but you have to call the direction and the timing correctly for a market call to be good.

ToSoft4Truth's picture

'Big Short' quote:


“I may have been early, but I'm not wrong,”


“It's the same thing,”

DownWithYogaPants's picture

All it takes is the dollar to bust and the market to go down seriously for you to all have poo on your lip.  Don't get too cocky or trite.

IH8OBAMA's picture

"So, I was wrong. I apologize." doesn't cut it, Lance.  Neither does showing that you were in good company in being wrong.

What you have to do is find out why you were wrong and fix it.  Apologies are for losers.

Badsamm's picture

"Apologies are for loser" and Pedos.
With love,
Kevin Spacey

Stuck on Zero's picture

That's a lot of words to basically say markets go up and down.

Osmium's picture

Wait, markets can go down?  Are you sure?

cossack55's picture

There is some ancient evidence that has been unearthed by marketeologists since the turn of the century.

ReturnOfDaMac's picture

Yes, markets CAN go down, its where the "D" in BTFD comes in.  They just don't stay down.  So BTFD.

Ramesees's picture

Markets can remain irrational for longer than I can remain solvent.


Lots of people went BK trying to do the housing short trade...The Big Short just highlighted a couple of the ones that didn't.

Snaffew's picture

zero hedge has been posting articles that have warned of the demise as well as posting articles that urged the bull on, although the latter is less than the former for sure.  Zero hedge posts articles and it is up to the reader to decipher and act on the info provided.

LawsofPhysics's picture

No, there will be no "crash" in the publically traded "markets" that exist right now. The people in the banking and finance sector of the eCONomy continue to give themselves access to FREE (or damn near free) money via The Fed's printing press, discount window or REPO operation etc. etc. and they have taken full control/ownership of your representation.

There is no longer a mechanism for true price discovery in any publically traded market, period. Global fuedalism and global Wiemar are on bitchez! A global DECLINE (no crash).

All fiat will simply die, and yes, it may take a while....

In the meantime...

"Full Faith and Credit"

Consuelo's picture



There's a little thing called Foreign Policy (and trade wars) that just might get in the way of a slow decline.   Perhaps not, but the signs increasingly point to conflict.

LawsofPhysics's picture

Nothing changes so long as every central bank is printing and trying to "manage" their eCONomy for the benefit of the status quo.

Again, don't overthink it, who are you going to trust?

"Full Faith and Credit"

Two Theives and a Liar's picture

Taking a financial manager to task for preserving client capital is simply foolish. Where was the "buy and hold" crowd in 2008? Still in "school" most likely. One day they will understand the 2 most important words in fight club:

Gold Bitchez!

Honest Sam's picture

I wish I had been unconscious in 2008-9 and would have 'stupidly' held. 


Two Theives and a Liar's picture

Well I'm not a "smart investor". But I did buy gold and silver starting around 2003.  $400/oz for gold and $5/oz for silver just seemed cheap for "real money" (I had just learned what that meant thanks to Bob Chapman)

History has many examples of the ultimate utility of real money. 

Fast forward to 2017. I'm still a buyer. Yes bitcoin has a place (moving currency privately IMO), but it doesnt replace my stack.

Good luck to everyone. We will need it. 

ReturnOfDaMac's picture

Do you really need all of these charts to say BTFD?

buzzsaw99's picture

If simply “buying and holding” an index is indeed the way to manage money, as suggested by Carmel, then why would you ever “pay a fee” to someone to do that for you? You can do it yourself from roughly 0.25-0.30% at Vanguard...


that is the conclusion that more and more people come to every day.  they aren't wrong.  you simply cannot beat the market AND skim your 2 and 20 year after year.  you. can't. do. it.  only cheaters can do that.  only the squid can do that.  only front runners with big clients can do that.  you. can't. do. it.


We're not paying for THAT.  [/Jacob McCandles]

ReturnOfDaMac's picture

Hear hear!  BTFD and maybe some squid if you want extra ooompf.

any_mouse's picture

I am not Frank.

The markets should have corrected.

Fundamentals aren't there. Fantasy valuations. Stock buy backs funded by 0% debt. Non-GAAP financial reporting. Massive central bank interventions.

Malinvestment is corrected in a healthy economy.

Look around, the USA is not a healthy nation. The economy is not spreading the good stuff around. Hollowed out. Gutted for short term stock boost.

Financials are on steroids and cocaine. Everyone else is reaching for opioids.

Consuelo's picture



"Note: Myself, and everyone that writes for Real Investment Advice, do so under our actual name. We pride ourselves on our transparency, and our responsibility, to all that read our work. We value our loyal following and work diligently to improve upon the original ideas and research we share" 

Gee, thanks Lance...  I'm touched by your devotion.   Now then, how much are those management $$$Fees again...? 

Cardinal Fang's picture

So, we had a communist as President for 8 years and then a capitalist gets elected.

And no one saw a bull market?

Bullshit, it was one of the most obvious plays.

Almost 10 years of pent up demand has to go somewhere.

So, what happens now, is managing the forces at play between switching the American economy back on and the residual, parasitic commie drag.




Grandad Grumps's picture

It is easy to profit from a corrupt market when on us complicit with those who run the con. Now that computers are Maintaining price control at the direction of higher powers all one has to be concerned with is being in the good graces of the corrupt higher powers. That is not something that we meek folks can or would do. We think it is wrong.

ReturnOfDaMac's picture

Grumps, there's the way it ought to be, and there's the way it is.  The way it is, BTFD is all you need to know, today.  Will it change? Yes, but not today.

chestergimli's picture

My! My! I wonder what would happen if some hackers wormed their way into those maintain the price control computers.

Liberaldisdain's picture

LOL,  "what a maroon." ~ Bugs Bunny

rp2016's picture

ZH, one cutting please.

You and your buddines seemto be losing your mental balance. This is only the beginning. Have you switched sides yet ... I am looking for confirmation to see if Donald has switched sides. Confiration will come after the NEW FED.

Honest Sam's picture

It might be better use of your time to get away from your M/S Office Suite of pretty, colorful graphs, and diagrams---which has proven for 9 years to be the lost decade for the bears, a gradually diminishing bunch for those that didn't bust out---- and spend it knitting.


johnjkiii's picture

The laugh here is that the myth of B&H still pervades the thinking of some people. 99% of B&H advocates don't. They are usually the last to panic and get blown away near the bottom and then re-enter when markets have already moved up and the mob has bought. Those who are real B&H investors consist of people who pay no attention or want to hold because dad & mom left them their stock. Buffet holds his positions in about a third of his portfolio while the rest gets traded. Read his annual reports if you disbelieve. Finally, if you miss the last 80-90% of the down moves, you win big when the cash is counted. That said, the opinion of someone else is no substitute for discipline and the most important is knowing when to sell as well as when to buy. Those triggers do not come from heeding the advice of so called pundits but are learned after trial & error.

EyesWise Shut's picture

How many times the market has shown unnatural, incredible and unbelieveble resiliance to a multitude of previously deemed "catastrophic" events? I have come to the conclusion that there are forces at play that have nothing to do with traditional analysis but are most certainly driven by by expectations that after a "monetary reset", being administered to the sheeple worldwide for I don't know yet what pretext, owning stocks will be a much better situation than cash. Insiders know it which explains the relentless buying of stocks. Act accordingly.

Econogeek's picture

Seems like Lance Roberts is in the boat with most other money managers.  

He's net (very) long, nervously counting on his ability to identify the start of the next big decline so he can get out in the first wave of selling. 

The Real Tony's picture

Ponzi's go straight up then straight down and only the top 5 percent gets paid. Meaning 95 percent of the bag holders or buy and holders will lose big. Ponzi's don't correct they only end with a crash. The so called market today is nothing but a 100 percent pure ponzi.

venturen's picture

Thankfully we are now on a permanently high plateau thanks to printing trillions....I feel so relieved that we no longer need economic and capitalism...just a 15% stock market increase year in and year out off printed money given to just a few bankers!


The money changers have given us such a bright future

freedom1798's picture

The graph showing the PERCENTAGES is mis-leading in that the upside can be any positive number, but the downside is mathematically capped at -100%.

BetterRalph's picture

If I wanted to track "the health of the Government under the hood" I could track their TSP. When I track their TSP I see lots of uncertainty and much problems when attempting to react like a day trader. Maybe people don't want to talk about this cause they are scared?

uncle_vito's picture

I gained a lot from the major market crashes in 2000 and 2008:   Never use the market to build your retirement nestegg.

qwertyFUBAR's picture

In an infinite universe there are financial markets somewhere whose charts trace out the NYC skyline.  Pre and post 9/11.