Guru Grades

James Dines: A Living Legend? (Last Updated 2/26/10)

As suggested by a reader, we evaluate here the public stock market forecasts of James Dines since the second quarter of 2002. Evaluated predictions/recommendations come indirectly via MarketWatch columns, which have reported his commentary occasionally in recent years. James Dines is editor of the The Dines Letter investing newsletter, published since 1960, which promises: "insights into investing and the economy, including timely stock, and precious-metals recommendations; economic forecasts; bull-and-bear market strategies and details that clarify today’s markets and economy..." The table below presents highlights from his public stock market forecasts and shows the performance of the S&P 500 index over the 21, 63, 126 and 254 trading days after the publication date for each item. Red plus (minus) signs to the right of specific items indicate those that the market has subsequently proven right (wrong). We conclude that:

• Much of James Dines' commentary focuses on gold and other precious metals, not covered in this assessment.
• A crucial element of his forecasting approach is mass psychology: market fluctuations derive from oscillations between mass fear and mass greed on the part of investors/traders. He also uses fundamental and technical analyses in constructing forecasts.
• Based on subsequent stock market performance and our judgments about his forecasts for overall stock market direction, James Dines' overall stock market forecasting accuracy rate is 52%, a little above average. However, his forecast sample size is very small, as is therefore our confidence in this conclusion.

James Dines offers a self-assessment of his forecasting track record, somewhat more positive than this one.

To augment the tabular summary below, we note that:

Peter Brimelow in MarketWatch (11/19/09) writes: "Over the past 12 months through October, the Dines Letter is up 111.12% by Hulbert Financial Digest count versus just 10.71% for the dividend-reinvested Wilshire 5000 Total Stock Market Index....over the past three years the letter is down an annualized negative 12.89% versus negative 6.74% annualized for the total return Wilshire 5000. That's including a catastrophic 62% loss in 2008. ...if you go back ten years, the Dines Letter was up an annualized 6.83%, versus negative 0.02% annualized for the total return Wilshire 5000."

Peter Brimelow in MarketWatch (5/28/09) writes: "...[O]ver three years: he's down 20.21% annualized vs. a negative 10.72% annualized for the total-return Wilshire 5000. Only over the longer run does Dines' post-millennium rally show up: he's up 3.97% annualized vs. negative 1.59% annualized for the Wilshire."

Peter Brimelow in MarketWatch (6/12/08) writes: "Over the past five years, the letter has achieved a 14.2% annualized gain, vs. 8% annualized for the total return DJ Wilshire 5000. Over the past 10 years, it's up 10.3% annualized vs. 3.7% annualized for the total return DJW. ...Over the past 12 months, it's down 37.9%, vs. a loss of 10.1% for the dividend-reinvested Dow Jones Wilshire 5000. ...Year-to-date, The Dines Letter is still down, 39.3% vs. a loss of 10.3% for the total return DJ-Wilshire 5000. ...Since the HFD began monitoring Dines in mid-1980, he's underperformed the market, 6.3% annualized vs. 11.8% annualized for the total-return DJW."

Peter Brimelow in MarketWatch (12/23/07) writes: "...[O]ne of 2006's top 10, The Dines Letter, comes in 12 from the bottom, down 11.4% vs. 7.51% for the dividend-reinvested Dow Jones Wilshire 5000."

Peter Brimelow in MarketWatch (1/1/07) writes: "This year, Dines is fourth among the HFD top-performers, up 48% vs. the dividend-reinvested Dow Jones Wilshire 5000's 16.54%. ...Even more impressive, over the last ten years Dines is up 17.16% annualized, vs. 8.16% for the total-return DJ Wilshire 5000."

In summary, James Dines' stock market forecasting accuracy rate is a little above average. Confidence in this conclusion is very low.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.