Doug Fabian - the Mav: Fabian attempts the impossible

» Normxxx - Fabian attempts the impossible

NEW YORK (CBS.MW) -- Just a year ago, on Aug. 1 2003, Doug Fabian launched his new service, VIP Investor, with these ringing words: "Welcome to VIP Investor! You are about to hop on the fast track to profits! You'll also discover that it's possible to make 50%+ a year without the risk of stocks or options.

"We'll use index investments, mutual funds, bear funds and Exchange Traded Funds to pursue extraordinary returns and, most importantly, our sell strategy is designed to keep your principal intact...

"We'll pursue profits by pouncing on short-term opportunities, looking to make 5% or 10% in 1 to 12 weeks. We'll hop on intermediate trends that can yield 25% to 50% in just 3 to 6 months, and we'll look for shifts in market trends and invest against the herd.

'While this is a brand new service, replacing Sector Investing, the strategies and principles are the same ones used in Successful Investing, the Fabian newsletter founded 26 years ago!

"Also, be sure to check out Doug's Million Dollar Challenge at the link below. I've put a chunk of my own money to work as I begin my quest to double $500,000 in 365 days!"

Oh yeah?

This is what really happened according to the most recent data from the Hulbert Financial Digest.

For the 12 months ended July 31, VIP Investor lost 33.6 percent. In contrast, the dividend-reinvested Wilshire 5000 gained 18.3 percent during this time.

Obviously, this is a particularly catastrophic result for Fabian. But the fact that he failed to achieve a triple-digit annual gain is not at all surprising.

As Mark Hulbert explained in a column last year on Fabian's claim last year, all the HFD's monitoring suggests that annual gains above 15 to 20 percent are unsustainable in the long run -- and highly unpredictable in the short term.

Triple-digit gains do happen. But letters that experience them, for example Medical Technology Stock Letter, also tend to experience high double-digit losses. (See my June 14 column).

Bottom line: if someone promises triple-digit gains, don't walk, run away.

So why did Fabian put his head in this noose?

Presumably because it does sell letters. Amazingly, investors still prefer bold claims to mediocre success.

I am beginning to think that Fabian, who writes with tremendous force and clarity, may be as great a salesman as his father, Dick Fabian, who rose to fame advocating a stunningly simple moving average system in the letter now called Successful Investing (and still published by his son).

You had to see Dick Fabian in action, preaching to packed crowds investment conference, to appreciate his messianic impact. Read Mark Hulbert's June 10 2003 column about the Dick Fabian phenomenon, it's a classic.

The difference is that Dick Fabian's system really worked. Doug Fabian's does not. In fact, he's even begun to second-guess his father's system in Successful Investing, to no good effect.

To the true salesman, of course, the product to be sold is ultimately irrelevant.

There was always a moment in a Dick Fabian revival meeting when he would screw up his face as he felt the pain of the investor who was tormented by the suspicion that everybody everywhere was making vastly greater gains than the humble 10 to 15 percent that Fabian's own system promised.

Then Fabian would yell at the top of his voice:

"BUT THEY'RE NOT!"

Doug Fabian, his son, obviously realizes that investors are still tormented by the same suspicion.

He's just decided to tell them what they want to hear.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx