Doug Fabian: Still Successfully Investing?

Last Updated: December 23, 2010Posted in Individual Gurus

A reader suggested that add Doug Fabian to Guru Grades. According to his web site, Doug Fabian “is the editor of Successful Investing, High Monthly Income and ETF Trader, and is host of the syndicated radio show, ‘Doug Fabian’s Wealth Strategies’. Taking over the reigns from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest [sic].” He is also the author of Maverick Investing: Building Extraordinary Wealth Through Unconventional Principles and President, Fabian Wealth Strategies. Based on web searches, we find that:

Here are a set of articles addressing the track record of his newsletter advice since 2003 from MarketWatch:

From Peter Brimelow in MarketWatch (12/29/11): “The ‘Terrible 10′ letters of 2011: …Doug Fabian’s ETF Trader (-41.9%)”

From Peter Brimelow in MarketWatch (12/23/10): “The Terrible Ten for 2010… Doug Fabian’s ETF Trader, Doug Fabian: -21.5%”

From Mark Hulbert in MarketWatch (3/17/10): “…a hypothetical portfolio that mechanically followed… [a] 39-week moving average system to switch between the Wilshire 5000 index and 90-day T-Bills…would have produced a 3.0% annualized return over the last five years. Fabian’s model portfolio, in contrast, produced a 1.4% annualized return over the same period.”

From Peter Brimelow in MarketWatch (12/24/09): “Fabian is down 49.2% in 2009 to date. This matches a record of negative 14.65% annualized over the last 10 years compared to 0.2% for the total return Wilshire 5000.”

From Peter Brimelow in MarketWatch (12/17/08): “I should also chivalrously note the presence of Doug Fabian’s ETF Trader (up 13.2%) [among the ten best performing newsletter portfolios for 2008]. Mark Hulbert and I have periodically booted Fabian for his outrageous advertising claims.”

From Peter Brimelow in MarketWatch (12/23/07): “Doug Fabian’s ETF Trader” is among the ten worst performing newsletter portfolios for 2007, down 27.4% through 11/30/07.

From Mark Hulbert in MarketWatch (4/24/07): “The 39-week moving average turned bullish in the middle part of last August…and remains bullish to this day. But at no time since then has Fabian allocated any part of his newsletter’s model portfolio to a diversified domestic equity mutual fund. This straying has exacted a big toll… If Fabian the son had simply followed the 39-week moving average system to switch between an index fund and cash, since 1992 his newsletter would have produced a profit more than two percentage points per year higher than it actually did. Its performance on a risk-adjusted basis would have been even higher.”

From Mark Hulbert in MarketWatch (9/29/06): “… Doug’s deviations have cost his newsletter’s model portfolio, according to the Hulbert Financial Digest. Since 1992, when Doug took over the running of this newsletter from his father, until the end of this past August, his newsletter’s model portfolio that focuses on the domestic equity market would have made 1.0 percentage point per year more, on an annualized basis, had Doug more closely adhered to the 39-week moving average. This portfolio’s performance would have been significantly better on a risk-adjusted basis as well.”

From Mark Hulbert in MarketWatch (10/12/05): “… Fabian’s No. 1 ranking over the past 25 years is heavily dependent on his newsletter’s performance during the first 15 years of that period. Over the past decade, in contrast, his newsletter’s U.S. stock market timing advice has significantly lagged a buy-and-hold strategy — and ranks only in the 43rd percentile among those market timing systems the HFD tracks. …with Fabian’s market-timing system having struggled quite a few years now, it becomes harder and harder to dismiss this ‘shorter-term’ period as a mere aberration.”

From Mark Hulbert in MarketWatch (8/2/05): “…[T]wo of the three funds that Fabian recommended to take advantage of the strong performance he anticipated in the international arena have come nowhere close to matching [a comparable index] return.”

From Peter Brimelow in MarketWatch (8/2/04): ” For the 12 months ended July 31 [2004], 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. …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. …He’s just decided to tell [investors] what they want to hear.”

From Mark Hulbert in MarketWatch (6/10/03): “If the younger Fabian had followed the 39-week moving average with the discipline his father was extolling in 1981, [his] newsletter would have issued a buy signal on March 21. Fabian the son chose to ignore that signal, however, and ended up not buying into the stock market until May 30, some two and one-half months later — when the average stock, as measured by the Wilshire 5000 index, was nearly 13 percent higher. …[B]y questioning his mechanical timing system, Fabian in effect started down a slippery slope, at the bottom of which is the absence of any investment discipline.”

The fabian.com web site does not offer testable public market commentary or newsletter performance data. Doug Fabian’s disclaimer (for example, for the ETF Trader newsletter) offers the following level of accountability:

“Neither the Editor, the publisher, nor any of their respective affiliates make any guarantee or other promise as to any results that may be obtained from using the Newsletter.”

“To the maximum extent permitted by law, the Editor, the publisher and their respective affiliates disclaim any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations in the Newsletter prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.”

“The Newsletter’s commentary, analysis, opinions, advice and recommendations represent the personal and subjective views of the Editor, and are subject to change at any time without notice.”

“Neither the Editor, the publisher, nor any of their respective affiliates guarantees the accuracy or completeness of any such information.”

“Neither the Editor, the publisher, nor any of their respective affiliates is responsible for any errors or omissions in any Newsletter.”

In summary, the long-run outperformance claimed by Doug Fabian appears to be a legacy of methods no longer strictly followed.

See Guru Grades for a snapshot of the accuracies of various experts in forecasting the U.S. stock market, including links to evaluations of the commentaries of other individual gurus.

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