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Chuck Jaffe Archives | Email alerts
Oct. 12, 2011, 5:48 p.m. EDT
By Chuck Jaffe, MarketWatch
BOSTON (MarketWatch) "” Steven Leuthold likes growing potatoes and sponsoring a sled-dog team in Alaska. He likes being out-of-step with the herd, and he likes his stock market indicators and hand-drawn investment charts.
He hates high-frequency trading, not only for what he believes it is doing to the broader markets, but because people are so consumed by finding ways to make little bits of money instantaneously that they are short-circuiting their ability to profit over the long haul.
Nowadays the founder of the Leuthold mutual funds can focus more on tubers, dogs and other pursuits, and shake off the annoyance of the rapid traders, who he believes will soon get their comeuppance.
But don't expect him to stop drawing those charts. Even in "semi-retirement" "” a state Leuthold officially entered on Oct. 1 when he stepped down as chief investment officer of Leuthold Weeden Capital Management, the Minneapolis-based money-management and mutual fund company he started in the 1980s "” Leuthold plans to keep his fingers on the pulse of the market.
Leuthold is not the best-known money manager, but his straightforward style and contrarian approach have made him a favorite with industry insiders for five decades. For years, his market commentaries and insights have been considered must-reads by investment advisers.
Chatting with him recently was a treat, especially since Leuthold rarely talks with the media. That's not due to poor investment results. Leuthold Core Investment Fund /quotes/zigman/158583 LCORX +0.57% has performed strongly against its peers over both the past five years and decade.
While the fund has lagged recently "” officially after the founding manager left "” part of Leuthold's success and one of his key lessons for investors is that there are plenty of times when going against the herd makes the most sense.
In his 'On the Mark' segment, Evan Newmark explains the value of being a contrarian investor and why it's OK to go against popular opinion. Photo by Mario Tama/Getty Images
"You don't have to be right all the time, you just have to be willing to move defensively when you think the risks are high," Leuthold said. "But most investment organizations don't allow it "” they force managers to be fully invested all the time "” and most investors can't do it because they are afraid of missing out while things still look good."
The downside of moving out of the market is the risk of underperforming the averages for a time. "But if you save yourself from a 2000 crash, or the problems we saw in 2008," Leuthold said, "that can pay off on a long-term basis. We got negative [about the stock market] in 1998 and really negative in 1999 and, boy, that paid off for us big-time eventually, but in the meantime we lost about half of our assets because people just couldn't let themselves believe that going against the herd was right."
Leuthold has always followed a quantitative approach, meaning he looks at a raft of market indicators and indexes, plugs the results into a formula and lets that formula drive investment decisions.
"The numbers are more valuable than our opinions," Leuthold explained.
"We've got 30% of the portfolio in equities right now," he added, "but if our major trend index turned to positive "” regardless of what I think of the government and the deficit and everything else that's going on "” we would move and increase our equities to 70%. "¦ Opinions are for show, but our numbers are for dough."
Leuthold said he intends to continue drawing 30 to 40 stock charts every week.
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Chuck Jaffe is a senior columnist for MarketWatch. Through syndication in newspapers, his "Your Funds" column is the most widely read feature on mutual fund... Expand
Chuck Jaffe is a senior columnist for MarketWatch. Through syndication in newspapers, his "Your Funds" column is the most widely read feature on mutual fund investing in America. He also writes a general-interest personal finance column and the Stupid Investment of the Week column. Chuck does two weekly podcasts for MarketWatch, and frequently makes guest appearances on television, and on radio shows across the country. He is the author of three personal-finance books. His latest, "Getting Started in Hiring Financial Advisors," was published in the spring of 2010 by John Wiley & Sons. Collapse
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