Best Spending Tracking Tool Poll

Rob Berger at Dough Roller has recently written up results of a poll for "what software or tool do you use to track your spending?".

As you can see Mint, Quicken, YNAB and Excel are the top four.  I use Excel just because I'm old fashioned and prefer to limit the spread of bank account/broker account information.

Just recently, a client requested I send Schwab account numbers to FutureAdvisor to see a recommended asset allocation.  I told him he could do it, but I didn't feel comfortable doing it.

By the way, Dough Roller is a nice article aggregation site for those interested in DIY investing.  I recommend checking it out each week.

The Most Important Thing About Bonds That Most Investors Don't Know

Not a bad hedge!

I've recently read a couple of books about bonds along with an article about how to protect a portfolio from a stock market correction.  The article was one of those Yahoo! type articles touting something like 10 ways to protect your portfolio.  It listed a number of esoteric ideas including puts, stop loss orders, etc. Nothing about bonds.  Maybe bonds wouldn't be your first thought either.

Maybe they should be.

Let's cut to the chase and take a look at the four times out of the past 20 years that the large cap core index, essentially the S&P 500, has produced a negative annual return along with the return on the Barclay's Aggregate Bond Index:

	2000	2001	2002	2008
Large Cap Core Stock Index	-1.1%	-4.8%	-9.8%	-22.8%
Barclay’s Aggregate Bond Index	+11.6%	+8.4%	+10.3%	+5.2%

 Source:  BlackRock Asset Class Returns

Hopefully something jumps out at you.  The fact is that bonds, as the table clearly shows, offer a pretty decent hedge, i.e. insurance, to dampen the impact of stock market downturns.

People many times want to get wrapped up in the mathematics and look at correlations which, essentially, are fancy averages; but there is more to it than this.  I say this because most correlations disappointed investors in 2008.  Asset classes that were supposed to provide a cushion in the event of a downturn didn't.

Bonds, on the other hand, especially Treasury notes and bonds which comprise most of the Barclay's Bond Index, are the go-to asset when investors get scared!  This is called "flight-to-quality."

Understanding a bit of history can lead to a pretty good idea of how bonds will act in various scenarios. Is it possible for both bonds and stocks to have a negative return?  Surely, especially when inflation picks up.  Most likely, in this situation, if stocks drop (which is not a given), it won't be by much.  On the other hand, if there is a major downturn, 15% or more say, it is probably because  the market is scared and bonds could be expected to do well.

One point worth emphasizing is that fixed income encompasses money markets, certificates-of-deposit, and savings accounts.  Sometimes people treat these as bond like instruments.  They are not.  Their price won't rise in a "flight-to-quality" instance.

What About Levels?

Most of the bond market has fixated over the past few years on the historically low rates and the need to position portfolios for a rise in rates.  After all, the thinking has been there is nowhere to go but up. Well, time has proven that this isn't exactly the case.  But beyond that, where should bond investors be today?

Well, if they load up on short duration bonds and corporate bonds offering higher yields, they could be severely disappointed in a crisis.  For example, if the market became convinced that we were locked into a serious Japanese-type deflation episode, the meager 2.35% 10-year Treasury yield could look robust.

The bottom line is that investors need to recognize that hedging like, insurance like, properties of bonds when managing their portfolios.  When is more the question rather than if when expecting a stock market correction?  When it comes, investors will appreciate their bonds (pun intended).

Gobbledygook!

I'm a fan of Barron's.  Let me say that right off the bat.  Part of my every weekend is devoted to reading it cover-to-cover.  Even though I'm an indexer, buy-and-hold guy, I like to see ideas and read what people think about the market.  I especially like articles on specific companies and analyst outlooks.

It seems that recently the publication has made a push to present "Top Advisors" and "All Star Advisors."  Every weekly publication now has a list of such advisors.

I even like these lists and reading what the advisors think.  A lot of it is total hogwash, and I have to say that I'm amazed that higher wealth families pay dearly for this advice.  I admit that high-wealth individuals and families need comprehensive services; but, from a lot of what I read, the investment services they are getting are worth nowhere near what they are paying.

What bothers me, though, is that there may be individuals who read this stuff and actually act on it.  Let me give an example.  Top advisor presented on page S19 of last Saturday's issue:  Joseph W. Montgomery of Wells Fargo Advisors.  The write-up says "Old school diversification, with stocks, bonds, and cash, served to pare portfolio risk for many years.  But it failed in the 2008 crash..." It goes on to tout commodities, etc., for diversification.

Really? I sn't there a point where we need to look at the data.  Check out Asset Class Returns A 20-Year Snapshot. by BlackRock.

In 2008, stocks were down -37% (Large Cap Core) and bonds (which "failed"?) were up +5.2%, as evidenced by the Barclay's Aggregate Bond Index, and cash returned + 2.1%.  Reflecting on these numbers and the much ballyhooed pounding of retirees in 2008, one has to seriously question diversification.  UNLESS THERE ARE EXTENUATING CIRCUMSTANCES, RETIREES SHOULD HAVE AT LEAST 40% IN BONDS AND CASH.  Following this fundamental rule enabled many retirees to weather the worst stock environment since the 1930s and come out fine in the ensuing sharp rally.  But, of course, this isn't a "man bites dog story" and, therefore, is not as sexy as the scary "crash destroys retirees nest eggs" write-up.

Just for the record, you may want to check out the returns in 2008 of commodities.  Still interested in diversifying into commodities?

Hopefully, you aren't reading this the wrong way.  I'm not anti-commodities as a diversifying asset class.  The point is to be careful.  If you sell bonds and buy commodities thinking you are reducing volatility, you may be in for a shock.

In the world of investing, math sometimes makes us lazy.  Give me a bunch of asset correlations, based on past data, and I'll construct an optimal portfolio.  Easy...I just feed the correlations into the program and it spits out weightings.  Twelve months down the road, we find that the world has acted a lot different than it has historically.  The price has been paid for lazy thinking.

Here is what investors, even "Top Advisors," need to know and think through.  Bonds are the "flight-to-quality" asset - especially U.S. Treasuries.  Long periods go by and investors forget about this feature of bonds--especially periods like the end of the 1990s and 2007.  Behavioral finance people find that investors ramp up their risk tolerances during these periods and shun bonds and increase stock exposure.  If stocks go up and commodities go up more, a light bulb goes off and the diversifying quality of the asset class is widely emphasized.

The bottom line is:  as always, check claims.  We live in a world where this is very easy.  If you don't, you could fall prey to pure gobbledygook; and it could cost you.

Bond ETF Fund Performance (Update)

A Different Kind of Bonding

I last reported on bond ETF performance on 5/23.  Here is a year-to-date update on the performance of funds I follow based on Morningstar net asset value performance data.

Allocating the fixed income portion of invested assets has been a challenge for investors over the past few years and continues as rates refuse to rise in tandem with experts' expectations.

 Not long ago, investors could put the bulk of fixed income assets in an index fund tracking the Barclay's Aggregate Index and then go to thinking about the stock portion of assets.  Not true in 2013, and still not true as we approach the end of 2014.

An important dynamic in today's market is the rising dollar and the lower yields globally.  For example, the yield on the 10-year German Bund is 0.85%, 143 basis points below the 2.28% yield on the 10-year U.S. Treasury!

As you can see, the returns vary widely among the different funds.  Since the last update, long duration Treasury notes and bonds have outperformed high yield instruments; and the yield curve has flattened. International bonds have not fared as well in recent markets.

Unfortunately, most 401(k)s do not offer a decent selection of bond funds - you are forced to select from a couple.  On the other hand, if you have an IRA, you typically have the selection available below as well as many others - another reason in favor of rolling over 401(k)s.

In general, you want to limit, to the extent it makes sense, the bond exposure of your investable assets  in your taxable accounts--where they will get hit with your marginal tax rate as ordinary income--and invest your bond allocation in qualified accounts like 401(k)s, 403(b)s and Roths.

The bogey in the bond market is AGG, the Barclay's Aggregate Bond Index - it is to the bond market what the S&P 500 is to stocks.  Thus, the overall market has achieved a return of 4.10% to date.

Disclosure:  this post is for educational purposes.  Individuals should do their own research or consult a professional before making financial transactions.

ETF	YTD RET.	DESCRIPTION
HYG	2.43	HIGH YIELD
AGG	4.10	TOTAL MARKET
SCHZ	4.14	TOTAL MARKET
MBB	4.27	MBS
CSJ	0.69	1-3 YR. CORP.
IEI	1.81	3-7 YR. TREAS.
IEF	5.64	7-10 YR. TREAS.
EMB	7.36	EMERGING MKT.
BKLN	1.18	BANK LOANS
IHY	0.79	INT'L. HIGH YLD.
PFF	11.20	PREFERRED STK.
FLOT	0.55	FLOATING RATE
BSJF	1.51	2015 HIGH YLD.
LQD	6.33	INVEST GRADE CORP.
BAB	11.58	BUILD AMER.
BOND	4.82	PIMCO TOTAL RET.
HYS	0.93	0-5 YR. HIGH YLD.
VCIT	5.93	INTERM. CORP.

Posted by Robert Wasilewski at 9:14 AM

What are you getting for that 1%?

Call up 10 advisors, tell them you got $1.0 million, tell them you need help managing it.  You'll find they will be glad to manage it for you at a fee of 1% (or more).  That's $10,000/year  TO START WITH!

On average, the market has doubled every 9 years or so.  That's what an 8%, average annualized return will do for you.  Thus, the management fee your advisor extracts will average 50% above the starting fee or $15,000.  At the end of the 10 years, it will likely be north of $20,000/year.  That's assuming your advisor performs pretty much in line with the market.  You're probably wondering if he or she gets this raise even if he or she underperforms.  Of course!  This is Wall Street !

But that's not the total impact on you--because every dollar that stays in your nest egg versus drifting over to your advisor's pockets would be earning at a compound rate in the market.  Over decades, this adds up!

The evidence shows that 70 to 80% of investment advisors who time the market, pick stocks, and look for buy and sell signals on price charts actually under-perform the market indices.  And, in truth, it might not even be them.  They may be putting you into mutual funds that themselves take a goodly slice off the bottom line.  Your investment advisor, in other words, may be charging you for his or her "expertise" in picking mutual funds managed by others.

The good news is they won't be getting the fee mentioned above.  The bad news is that this is because their returns lag the market.

Wealthy people can afford to throw around $10,000 or multiples thereof.  After all, the bottom line is merely a reduction in the inheritance they leave.  More modest people on the path to retirement, though, can hardly afford this luxury.  The 1%, or greater, per year will eat up their nest egg and, after a couple of decades, will impact their standard of living in retirement.

The bottom line ends up being that the seemingly modest fee of 1%/year puts a serious dent in the ending portfolio value which, in turn, typically produces sub-par performance--performance that could be achieved at a much lower cost.

Thankfully, today these less expensive approaches (based on evidence showing the futility of seeking market-beating performance) are proliferating.

How to Find a Killer Stock

Hirschhorn Exhibit

Investment research is a widely discussed topic.  Formally or informally. After all, searching for that goose that lays the golden eggs has always been one of human's most popular endeavors.  Here's my version; but, in case you're  expecting something else, let me tell you right off the bat that the goose has eluded me as well.  Let me be clear.  I'm not complaining at all about how the markets have treated me.  But, still, there have been opportunities missed; and they present learning opportunities.  As you'll see, this isn't a science and takes patience and staying power.  If it was easy,  I would be off collecting golden eggs rather than expounding on the subject.

Before we start, I  can  save you some time and tell you what not to do.  Forget the penny stocks, the CNBC pundits, the data mining/back testing stock screening approaches.  Forget speculating stock options, trading frontier markets, or even heading to California if they announce a gold rush.  Ooops! That was over 150 years ago, and that was a total bust for those who made the trek.  All of these will likely drain your funds so you are left empty-handed, or gun shy, when the real opportunities arise.

As a matter of fact, the above have eventually even underperformed the boring ol' market itself!

If you've been here before, you would maybe expect me to shout out a big FERGETABOUTIT!!!!!! After all, I'm an indexer.  But I won't and don't.  Although I believe 90% of retirement assets for most people should be indexed, I do leave 10% leeway for investing in individual stocks.  And this 10% can have some potential, if you have the aforementioned patience and staying power.

And, to prove its potential, I present you 2 of my biggest misses.  This is from the "opportunities on the end of my nose that I missed" file.

The misses aren't easy to admit because I have always felt that I was the perfect person to uncover a gem.  I have the perfect qualities.  First of all, I am the average man - the "man in the street."  If I see something and like it, the masses will like it.  I'm not the guy standing at the Hirschhorn Museum admiring a photograph of a mop standing in the corner.  Instead, I'm the one walking away muttering "I don't get it!  Not one bit."

Secondly, I'm cynical; so I need evidence.  When I first heard about the internet, the first words out of my mouth was "a fad!"  But when an email came into the office from Australia, sent 5 seconds earlier, congratulating the firm's economist on a quote in the Wall Street Journal, I went "Whoa!!!!!!" Sometimes my brain is quick, and I saw it was the real thing.

Before I jump into my first miss, some of you young people will think that you won't get these kinds of opportunities.  Don't believe it.  You'll probably get more.  You just need to be patient, recognize them, and be ready and able to jump on them when they come along (with 10% of your nest egg).

OK.  Let's go back a few years.  I'm sure some of you have guessed this one.  I'm wrapping up my Economics class; and one of my students is standing at the back, and the others (instead of bolting to the door as usual) are gathered around him, chattering excitedly.  I approach them and ask what they are looking at.  You guessed it - it was an iPod.  They were each trying the ear phones, asking about how many songs he had on it, where he bought  it, how much it cost.  I heard over and over "this is da' bomb" my generation's version of "cool."

I held the iPod and it got Jobs'es desired reaction:  it just felt and looked awesome.

There is an ongoing question in the field of investment research on the value added in visiting companies.  Few people raise the significance of seeing customers with a new product.  Here, in front of my nose, was a corollary of famed investor Peter Lynch's advice to invest in "what you know." Those students were future customers for Apple and (think about this!) marketers - they were going to push the iPod to their friends!

If I would have gone out the next day and put 10% of my assets in Apple stock, I would be writing this from the beach on Maui because we know the history of the stock.  Another clue came later when I visited an Apple store.  At the time, stores on either side in the mall were empty; and yet the Apple Store was elbow-to-elbow with the so-called geniuses answering questions and customers excitedly trying and talking about the products.

The second example took place in College Park, Maryland.  Again not traditional stock research.  My daughter:  "Have you ever eaten at Chipotle?"  Me:  "No, what is it?  Mexican?"  Her description of the layout left me thinking I'm going to have a headache eating fast food with hyped-up college freshmen. Two bites and I knew this was the real thing.  Since then I've eaten at Chipotle throughout Maryland and Virginia.  Today, several years later, I go out of my way at lunch time to find a Chipotle.  In every single instance, there is and has been a long line, many times winding out the door!

The story with the stock was the same as with Apple.  It was a "I need a swift kick" for missing this one.  There were others, of course.  A bit more difficult but arguably pretty easy to see, even for ones who weren't searching for investment opportunities 24/7.  For example, Under Armor.

Something to keep in mind is that these companies are not easy to hold on to and to get their full upside. After stocks double, there is a tendency to translate the gain into real terms - i.e., the number of flat screen TVs the gain equals, etc.  When you start to reach this point, take out your Buffett book and read over and over the value of holding over the long term!

What to do with cash?

With shor- term interest practically zero, investing cash in today's market is problematic.  Getting any kind of yield means giving up liquidity and/or taking risk.

The issues facing investors are nicely laid out by Beverly Goodman in The Cash Conundrum in this week's Barrons.

One of the examples she covers is worth going over specifically. Pimco's cash alternative exchange traded fund (ETF), with ticker symbol MINT, has a SEC yield of 0.46%:

Source: Morningstar

CLICK IMAGE TO ENLARGE


It also has, as shown, an expense ratio of .35%.  The net yield, then, is a measly .11% which could easily be wiped out by a drop in the price of the Fund.

The bottom line is investors need to be careful investing cash that is necessary for emergencies, expected expenses like a down payment, or college tuition.

What Does the Casino Want?

Think about this.  Suppose you run a casino.  What kind of experience do you want your clients to have? First off, I think you'll agree that you would want them to win the first time out.  If they come in with $1,000 and go home with $2,000, they will market your casino which they'll view as the Goose Laying the Golden Eggs to all their friends.  In fact, next time the bus leaves the community center bound for the casino, they will surely have a couple of friends aboard.

But surely you don't want your clients to win, on average, over the long term because this would put you out of business.  So you set it up so that the odds are against them.  Most of your clients know this, of course, but play anyway because they feel "Mother Luck" is on their shoulder as demonstrated by how easily they doubled their money the first time out.  In fact, some are truly downright stupid and come back, not with the $1,000 they can afford to lose, but with a greater amount that will adversely affect their life style if it goes down the drain.

You can obviously develop a feasible, hypothetical scenario going forward.  With three friends tagging along, the odds are that one will be a winner at the end of the day.  This would be in the casino's interest as the Ponzi-type set up spreads.  The group thinking here could very well be that the winner views him or her self as a superior gambler.  The others obviously don't know what they are doing.

If you're thinking this is really about stock investing, you are right.  One of the worst things that can happen in investing is that the novice hits it big at the get-go and that little voice in the back of his head says "this is easy, we should up the ante."  Experienced investors know that the investment world is like mother nature - assuming everything will stay smooth just  because the ocean is calm can lead to a disaster.

This happened to  many novices in 2001.  At the time, all an investor had to do was buy an internet stock at $25 and watch it go to $75.  How hard is that?  The fact is (like in many areas) if it looks too easy, it probably is.  Some are still shell-shocked from the end game of that experience!

The bottom line is that you need a well-grounded investment philosophy to be a successful DIYer. Going in ad-hoc, thinking it is easy, sets you up, like the casino gambler, to lose in the long run.

Portfolio Mechanics

Many times, when reading financial help books, I come across a recommended portfolio and wonder if readers know how to actually implement the portfolio.  There used to be (and may still be) a popular book series called "the Missing Manual" in the computer help area. To me, there seems to be a "Missing Manual" issue here.

For example, I recently read a review of the book by Spencer Sherman, The Cure for Money Madness, on The Simple Dollar site.

Here is Sherman's recommended portfolio:

25% bonds (VBMFX)
12% U.S. large cap stocks (VFINX)
12% U.S. large value stocks (VUVLX)
6% U.S. small cap stocks (NAESX)
6% U.S. small value stocks (VISVX)
7% international large value stocks (VTRIX)
3.5% international small cap stocks (VINEX)
3.5% international value stocks (VWIGX)
2% emerging markets large cap stocks (VEIEX)
2% emerging markets small cap stocks (VEIEX)
2% emerging markets value stocks (VEIEX)
11.5% U.S. real estate (VGSIX)
3% international real estate (VHGEX)
4.5% commodities (VAW)

Observations:

• this portfolio is, IMHO, way too complex - a lot of the Funds could easily be combined using broad market Funds
• no single asset allocation is right for all investors 
• some readers will be able to execute the portfolio as listed; BUT many others, I believe, would be stumped on what would be the next move.

I haven't read the book, so some of this may be explained by Spencer Sherman.  I do know that in similar books the next steps, i.e. the mechanics of setting up a portfolio, are not discussed.

Understand that (this is sort of outside the box) money management is not like buying a car.  In buying a car, you go in and tell them you are interested in a sedan or SUV, color, 4WD or not, etc.  In money management, you take the investment style of the advisor you use.  In other words, it is not possible to go in and say, "I like the philosophy presented in The Cure for Money Madness, set me up a portfolio matching it."

Your best chance to get money management help for this approach is to first establish that a particular advisor uses a low-cost, well-diversified market indexing approach.

But back to doing it yourself.  You are in one of two situations.  You are taking over a portfolio of investments, or you have cash to invest.  For example, after reading a book like the above, you realize that your present advisor is charging way too much to manage your assets.  Or, you may be rolling over a 401(k).  In these instances. you may need to sell existing Funds, have tax questions, etc.  These can be tricky situations, and you may want to get some hourly consulting just to make sure you are not making some basic mistakes.

The second case would be where you inherit cash or want to get a maturing CD invested in stocks. This is much simpler; you need just focus on the buy side.

In some instances, where an individual has never transacted in the stock market, I recommend starting with a target date fund or life strategy fund.  These funds already do all of the allocation for you - you have one Fund to buy.  You just need to figure out the number of shares to buy and how to buy them.

Here, as an example, is the Vanguard "Moderate Growth Fund" allocation:

Underlying funds as of 07/31/2014

Rank	Fund name	Percentage
1	Vanguard Total Stock Market Index Fund Investor Shares	41.6%
2	Vanguard Total Bond Market II Index Fund Investor Shares**	32.4%
3	Vanguard Total International Stock Index Fund Investor Shares	17.9%
4	Vanguard Total International Bond Index Fund	8.1%
Total		100.0%

**Information on this fund can be found on Vanguard's Institutional Investors site.

As you can see, this is basically a 60% stocks/40% bonds allocation.

Suppose you have $100,000 and you are ready to take the leap and buy shares.  First off, you need the ticker symbol.  This Fund has a ticker symbol of VSMGX.  This ticker symbol can be input into the quote box on any financial site and the price ascertained.  As this is written, the price is $24.11.  Divide $100,000 by 24.11, and you find the number of shares to buy at approximately 4,000.

Once you log on to Vanguard or whatever broker you are using, you need to find the "Trade" button or, in Vanguard's case, the "Buy & Sell" button.  Next, on Vanguard, click "Buy Vanguard Funds" and it is straightforward from there.

In carrying out a transaction like this, I would likely do the buy in a few transactions - maybe 500 shares at a time.  If you are doing this for the first time, you may even want to start with 50 shares just to make sure the computer doesn't blow up when you hit the "buy" button ;)

I would also look at the bid-ask spread.  If it is wide, I would maybe put in a limit order.

When you first start, it is good practice to go slow.  I use Schwab primarily and have a routine I go through.  I run my eyeballs to the top and see available funds to invest.  I look to the left to make sure I am on the right account.  On the review page, I read the footnotes, etc.  I then go to "order status" to see that the trade was executed.  This is important because it is easy not to push the "buy" button on the review page and, therefore, not actually put in the trade.

An interesting point is that this simple process has historically outperformed 70% and more higher priced actively trading professional managers who seek to beat the market!

Once you are confident with the process, you can easily graduate to buying the individual Funds.  To replicate VSMGX requires only 4 Funds, the ticker symbols of which can easily be found on the Vanguard site.

Or you may prefer to jazz it up a bit with some of the Funds listed by Sherman Spencer.  Which will do better?  Only those with a crystal ball can tell!

Disclosure:  This post is for educational purposes.  Individuals should do their own research and/or consult a professional before making financial decisions.  My clients and I own some of the Funds mentioned.

Investment Book Giveaway

Mid-summer clean-up.  If one of the following books interests you, let me know.  All I ask is shipping cost.  Some of the books do have notes and/or underlining in them.   Email: robert@rwinvestmentstrategies.com.

• Dear Mr. Buffett by Janet Tavakoli
• The Little Book of Common Sense Investing by John Bogle
• The Elements of Investing by Burton Malkiel and Charles Ellis
• The New Coffee House Investor by Bill Schultheis
• How to Retire the Cheapskate Way by Jeff Yeager
• The Intelligent Investor by Benjamin Graham

Are You Beating the Brokers?

 Do you like stock tips?  Do you use broker stock picks?

Barron's has tracked  the performance of the focus list of 7 brokers over the first 6 months of 2014 ( RBC Is in the Lead Going Into the Turn, Vito J. Racanelli).

Here's the Table showing performance for 6 months ended 6/30/14:

RBC Capital Markets	10.20%
Morgan Stanley Wealth Mgm’t.	9.17%
Credit Suisse	8.18%
Bank of America Merrill Lynch	7.92%
Goldman Sachs	7.76%
Stifel  Financial Management	4.88%
Wedbush Securities	-8.68%
Average Broker	5.63%
S&P 500 Index Total Return	7.14%
S&P 500 Index Equal Weighted	7.65%

Source:  Zachs Investment Research

Note that, although the average return is below the S&P 500, it is because Wedbush Securities bombed with a return of -8.68%.  In fact, 5 of the 7 outperformed the Index.

What are we to make of these results?  First, for those with the time, the resources, and the know how, buying individual stocks is obviously the least-cost solution to managing assets.  Buy stocks versus funds, and there is no annual management fee.  In many instances, this can be a huge savings.  Versus low-cost index ETFs, the savings is there; but it is small.  Secondly, the market-beating potential for individuals managing stocks picked from focus lists, if it is there, probably requires at least a bit of  a buy-and-hold approach.  Thirdly, readers should know that there is voluminous evidence showing that, over the long run, broker picks do not add value and persistence of performance is absent.

The bottom line is that, if you follow the performance of the broker's stock picks over the next ten 6-month periods, historical evidence suggests that you should find no consistent leaders among the brokers.

A big question is exactly how would you incorporate the picks in a viable portfolio strategy?  Do you focus on the winning brokers and equally weight their picks?  Do you maybe use the picks of the top 3 brokers?  Or, should you take a contrarian approach and go with Wedbush?  Or should you go to RBC or Morgan Stanley to get an advisor and have him or her manage a portfolio based on the picks?

To me, it is interesting when you get down to the implementation level.  From my side of the desk, I know there are people who will read this type of article and go out and open an account with RBC or Morgan Stanley.  A light bulb will go off in their brainm and they'll think "my investment approach heretofore hasn't been successful because I've been following the wrong stock pickers."

One consideration is that using an advisor at the brokerage will result in fees that could wipe out the performance advantage of the stock picks.