Since we have begun charting musical hits, some sixty artists have hit the number-one spot on the Billboard charts before vanishing from popular music entirely. These strange phenomena are known as one-hit wonders. A few of my favorites are “Oh, Happy Day” by the Edwin Hawkins Singers, who hit the Top 10 in 1968, and Norman Greenbaum’s “Spirit in the Sky” from 1969. Neither the Edwin Hawkins Singers nor Norman Greenbaum ever had another big hit. There are investment managers like that. They had one big splash and average or mediocre results thereafter.
Robert Prechter was a two-hit wonder. He published the Elliott Wave Theory based on the Fibonacci sequence, a mathematical pattern found in nature and also observed in financial markets. In October 1982, Prechter correctly predicted that gold prices would fall and stocks would enter a super bull market. He won the US Trading Championship with a 444% return in his monitored options trading account and was chosen to be the 1980s’ “Guru of the Decade” by the Financial News Network (now CNBC). By 2009, with the DOW just under 10,000, Prechter predicted a crash that would be worse than the 1837 Depression, with the DOW falling as low as 1,000!
Prechter is not alone. Almost every year, there are one-hit or two-hit wonders who call the market or pick a stock or group of stocks correctly. They gain notoriety and investors follow them for their advice, at least for a little bit. At its peak, Prechter’s newsletter reached over 20,000 subscribers.
It is reasonable to think there must be a way to successfully sell before the market drops and buy back in just before it begins to climb. Entire technology industries have been born of coding algorithms to massage tons of data and decide the precise timing to make those buy and sell orders.
The late Jack Bogel, who founded Vanguard, said, I think very wisely, “In my 50 years in this business I do not know of anybody who has [timed the market] successfully and consistently. I don’t even know of anybody who knows anybody who has done it successfully and consistently.”
There is no question that investment managers like Prechter have hit it big once or twice. For the most part, they were one-hit wonders.
Compare that to one of my favorite stories about a man named Clifford Young. Young, a 61-year-old potato farmer, showed up for the Sydney to Melbourne Australian Marathon in his overalls and work boots, but he had left his dentures at home. The Sydney to Melbourne Marathon is 875 kilometers (544 miles), and the rest of the runners were all young, athletic, and well trained. Young ran at a slow and loping pace, and by the end of the first day he was far behind. While the other runners stopped to sleep for six hours, Young kept running. Young ran for 135 hours without ever stopping to sleep. He won the race, finishing some 10 hours ahead of the second-place runner.
That is what we try to do; we want to win. We want to finish in first place again and again, not disappear into obscurity. We want to press forward to win. It did not bother Cliff Young that he was far behind on his first day. At AFC, we know there will be times when others are out in front. We just want to be at the head of the pack in the long run.
We have a track record that is now 18 years long. We are not one-hit wonders. There have been times, like 2022, when we underperformed, but we stand on our long-term track record. We believe in these times of inflation that a five percent (5%) annual performance over the longer-term is probably not even going to keep pace with inflation. In the 1960s-1970s, the purchasing power of the dollar dropped by 70%. That is not where we want for our clients. We want to achieve a reasonably good rate of return, enough to outpace inflation and provide a margin in addition.
