Transcript

Hello, I’m Jeff Yastine. Thank you for joining Steve Forbes, John Shubert, and me for the Newsmax Investment Crisis Summit. 
 
Because you’ve joined us today, you will be one of the first to see groundbreaking research that exposes a “permanent flaw” in our financial system. 
 
A flaw that is derived by outdated theories, yet is legally imposed on investors by Washington.
 
A flaw that is actually forcing mutual fund managers to put 80% of your money into “dead weight” stocks . . . stocks that are destined to underperform.
 
Consequently, most Americans are unknowingly losing thousands — if not millions — of dollars right now. 
 
This flaw is causing them to work later in life, and often times abandon the concept of retirement all together.  And it’s ushered in a massive investment crisis that most people never knew existed.
 
In fact, some estimates suggest that you could lose up to 70% of your profits due to this permanent flaw . . . we will show you how this happens in a moment.
 
So, if you have a mutual fund, a 401K, a pension, or any other type of retirement account, I urge you to watch this presentation in its entirety.
 
Because not only are we going to unveil this permanent flaw, John Shubert will also unveil a system he designed to avoid this permanent flaw while simultaneously investing in the top 15 alpha stocks.
 
It’s a revolutionary way of investing unlike anything you’ve ever seen before.  And it is turning traditional mutual fund investing on its head.
 
Now, I want to quickly share with you the results of this system, but . . . I must warn you, the results are . . . well . . . unbelievable.
 
So in order to make sure that the investment system you’re about to see was fully vetted, with unquestioned accuracy and money-making power, I had the results back-tested and verified by a Professor of Accounting at Duke University.   
 
Here are the actual results that this professor shared with us. By using John’s system to avoid the permanent flaw, and instead invest in the top 15 alpha stocks, you could have recorded cumulative gains of 424% through some of the worst economic times in recent history. Compare this to the stock market, which only achieved gains of 63%. That’s beating the stock market nearly 7:1.
 
And, this is key, by using John’s system you would have been able to do this with LESS risk.
 
In fact, John’s rules-based system, could help you avoid major stock market losses like the 50% crash the pummeled investors in 2008 as well as the 50% collapse that crushed investors in 2000.
 
You’ll get all the details on John’s system, called the Alpha 15 Portfolio, in just a moment. 
 
And when you see how powerful it is, and how people just like you can use it to create massive wealth in any market, I think you’ll understand why, I am putting one million dollars into this revolutionary investment system.
 
After months of research and analysis, I was so convinced that this system could radically change the fortunes of any investor, I not only committed one million dollars into a trading account to take advantage of this strategy, but I also had Newsmax buy the exclusive global license for John’s groundbreaking system.
 
This was a first in the history of our company, and a decision I didn’t take lightly.
 
But once you see this system for yourself, I am sure you’ll agree it’s an absolute game changer. 
 
As we face an investment crisis of epic proportions, there couldn’t be a better time to get John’s revolutionary investment message out to as many people as possible — which is precisely why we’ve put together this Investment Crisis Summit.
 
Joining us now on this live video feed is Steve Forbes the Chairman and CEO of Forbes Magazine.
 
Steve, thanks for joining us today.
 
Steve Forbes:
Good to be with you Jeff, I look forward to being a part of this Investment Crisis Summit.
           
Jeff Yastine: 
And here in the studio, we have John Shubert.
 
John is a veteran of the financial industry for over 20 years. He currently oversees more than one billion in retirement plan assets. John was nominated by Morningstar for the “401(k) Advisor Leadership Award,” and he currently sits on the Schwab Trust and Custody Advisory Board where he consults on issues related to retirement asset management and industry regulations. Thank you John for being here.
 
John Shubert:
Thanks Jeff. And I want to thank Newsmax for hosting this summit and thank Steve Forbes for his contribution as well.
 
Jeff:
I want to dive right into this summit by sharing an upsetting statistic. The Employee Benefit Research institute states that 90% of the working population has less than $25,000 in savings and investments. 
 
John:
That’s correct Jeff. We have a serious investment problem as more and more Americans are hitting retirement age. As an advisor who oversees more than one billion in assets, I can tell you first hand that folks in retirement, and those entering it, do not have enough money for a secure retirement.
 
In fact, I’ll add another troubling statistic.  The Social Security Administration recently released it’s Fast Facts & Figures about Social Security for 2014 and Social Security benefits now provides more income than any other source of revenue for over 65% of retirement households.
 
Jeff:
That’s alarming. With the typical monthly Social Security check at about $1,200 for retired workers, I would imagine a ton of folks are struggling to make ends meet.  
 
John:
You’re exactly right. But it’s not all their fault. As you mentioned a moment ago, there are inherent flaws in the investment industry that dramatically reduce their investment returns, yet they know nothing about it.  These are very real problems, and are essentially a permanent condition of the market.
 
Jeff:
Hold that thought for a moment. Steve, a contributor on your website by the name of Edward Siedle stated that we are approaching “the Greatest Retirement Crisis in American History.” What are your thoughts on that?
 
Steve:
Well we have a retirement crisis in the sense that we are living longer. Back in the 1930's when Social Security was created, most people didn't live beyond the age of 65, or much beyond the age of 65. But if you are at the age of 60 now, with good health, decent health, you can expect to live another 20, 25 years. Which means you have to look at equity markets in terms of your planning, not just short term instruments. Once upon a time we had interest on bank CDs, which we will get in the next few years again. So yes, it is a crisis, and the sooner people start to prepare themselves both mentally, and in terms of their financial planning, the better.
 
Jeff:
I agree. You know, for decades a successful retirement plan included government benefits, employer pension and personal savings. It’s clear Social Security's future is in doubt, and employer pension plans are nearly extinct. This in mind, retirees will be forced to rely more on their own resources wherever possible.  In your opinion, where can retirees maximize their personal resources for retirement? You mentioned stocks . . . is the stock market the best place . . . a lot of people are getting out of stocks now?

Steve:
If you take a disciplined approach, the market is your friend. And the only hope you have, over time, of having assets grow in your retirement is riding the equity of America. Eventually, America always gets it right. So the time to get out is not when people are pessimistic, the time to get in is the sooner, the better, and the more, the better.

Jeff:
I’m glad you said that. A recent report from the Boston College Center for Retirement Research notes that stock market investments account for just 17% of the wealth of high earners, 6% of middle earners and 2% of low earners. It seems a lot of people are just avoiding equities . . .  the stock market . . . altogether . . .
 
Steve:
Being out of the market, even though the market has been highly volatile and will give you ulcers, being out of the market is a sure way to have a very, very unnecessarily rough retirement.
 
Jeff:
But many people still seem uncertain about stocks because, as you said, of the volatility. What do you say to those who are avoiding the stock market?
 
Steve:
The market not only creates wealth, but guards against the volatility in the economy in the sense that you have direct ownership in how America does. And eventually America outpaces the world.
 
Jeff:
I’d have to agree with you there, Steve.  We have our problems for sure, but America is one of the most innovative countries in the world, and I for one wouldn’t bet against us over the long term.  However, even when the economy is stable, there will be one group of Americans who failed to invest enough during their lifetime, and there will be another group who invested just like they were supposed to. But, and this is important, they never got the results they were told they would get.
 
John, why is that?

John:
There are a few reasons. Fees are a big part of it. John Bogle, the founder of Vanguard Funds – the largest Fund Family out there with over $4 trillion in assets – made a very important statement about these fees in my opinion. John Bogle said that if the market averages 7% returns and you are paying a 2% management fee, then over the course of your lifetime 70% of your profits go to the Fund Manager.
 
Jeff:
You know, when you first told me that last week, I didn’t believe it. But then you broke it down for me. Can you explain how this works for our audience?

John:
Sure. Take a look at this chart. The typical investment life of a person is 50 years. Let’s say that during that time the market averages a 7% annual return. In that case, a $10,000 compounded investment would go up to $294,570. But, let’s say your fund charges 2% — and many funds have all-in costs totaling 2% or more, which means you are only getting a 5% annual return. Well, a 5% return over 50 years only amounts to $114,674.  So you can easily see where a person can lose 50 to 70 percent of their profits to fees.  
 
Jeff:
It’s amazing how that “small” fee adds up. It has a lot to do with compounding the returns. And, I know you are going to show us how to completely sidestep these fees in a moment.
 
But first . . . Steve, are you familiar with this calculation from John Bogle?

Steve:
Well, John Bogle, who's really an investment hero, he's the one who came up with the first real index fund, because he realized in studies starting in his college days at Princeton University, that fees were eating portfolios alive, so to speak. And over time a 2% fee doesn't sound like much in the short term, but can halve your investment return over time because of compounding. The key thing is look at those fees, if you are tempted to buy an annuity, a good concept, especially having as an anchor, fixed income, look at those fees. And most people don't and get hurt severely by it.
 
Jeff:
Steve, according to Vanguard, 80% of equity funds underperform the index they are matched up with. 80 percent! So these fees . . . well, they go to fund managers as they underperform the market. Why do you think these actively managed funds underperform?

Steve:
Well if you have a 2% fee and that's not unusual in the mutual fund industry, and you take a 40-50 year time horizon, that 2% fee will cut your return in half or by a third. So if you would normally have $100,000, you end up with say $30,000 or $40,000 because of what fees have eaten up. You take a 5% return versus a 7% return. A 7% return a year means you double your money in 10 years. A 5% return means it takes 14 years to double that return. So you are really paying, it's not just 2%, over a lifetime, you are paying a 50-60% fee because of those huge extractions. So again, 2% translates into half or two-thirds, so instead of $250,000 you end up with $100,000. That's real money, and that should be your money, and not somebody else's.
 
Jeff:
So John . . . these fees, are they the permanent flaw you have been hinting at?
 
John:
Well, fees are the first part of the permanent flaw. They destroy investor returns. There are over a dozen possible fees in 401ks and mutual funds . . . many of which are hidden and investors don’t even know they exist. 
 
For example, your 401k provider might receive commissions from mutual fund companies to steer investors like you into higher-cost funds.
 
And when you add up all these fees, which can get as high as 2.5%, a fund manager actually has no mathematical hope of outperforming their benchmark. 
 
Jeff:
That’s alarming. What is the second part of the permanent flaw?
 
John:
The second part of the permanent flaw is that the regulatory and legal structure in Washington actually forces managers to underperform.  These laws are based on a flawed investment framework called Modern Portfolio Theory. This flawed theory, when combined with Wall Street fees . . . well, it is very destructive to investor returns.
 
Jeff:
Steve, are you familiar with the Modern Portfolio Theory?
 
Steve:
Well Modern Portfolio Theory is the idea that you can evaluate risk and maximize return at a given rate of risk. Sounds great, if the world was stagnant, static, it would work pretty well. But the world isn't static, modern portfolio theory recognizes that to a certain extent, but unless you are in an index fund, we have this crazy environment where with the combination of fees and the combination of trying to manage a wide range of stocks, most, but not all of money managers underperform the market as a whole and even underperform their own benchmarks.
 
Jeff:
John, you are one of those trusted advisors. It’s why you sit on advisory boards and have been nominated by your industry as a top advisor. And, it’s clear you and Steve are in agreement on Modern Portfolio Theory and how it is causing a huge problem in the fund industry.  I’d like to get into more detail on this but my concern is if we dive too deep it will get too technical.  Can you take a moment and simplify Modern Portfolio Theory so our viewers can easily understand this theory and how it is affecting them?
 
John:
Modern Portfolio Theory basically means that in order to be deemed a worthy fund — and this is key, the way the portfolio is constructed . . . its stock holdings . . . must also look similar to its benchmark. A benchmark might be the S&P 500, the Small Cap Index or the Energy Index. Now, if the fund manager’s performance or portfolio composition strays too far from the benchmark the fund won't even be considered by the industry . . . making it nearly impossible for the fund  to bring in new money which is critical to a fund's success and survival. 
 
Now, that's fine if the fund's performance is poor.  But the fact is, outperforming managers are also punished if their holdings aren't close enough to their benchmark — so, as a result, managers typically end up investing in ways that the stocks they hold are very similar — almost exactly — like their benchmark.
 
Jeff:
You’re losing me a bit.
 
John:
Think of it like this. Imagine yourself as a driver in NASCAR where all the racers drive stock cars. These cars are basically required to be built to be the same . . . the same chassis, suspension, engine, etc. So winning comes down to driver skill, team tactics, and a good crew.
 
Jeff:
Ok.  I’m with you so far.
 
John: Now imagine if you’re racing team was winning all the races by a lap. Then imagine NASCAR officials coming in and stating that you are doing too well, so they are going to put a governor on your car.  When you get too far ahead, they are going to automatically slow your car down so that you are in line with your peers.
 
Jeff:
But why would they do that?
 
John:
Exactly. It would be insane. It would defy the purpose of NASCAR.
 
But, that’s exactly what mutual fund managers, even very good managers, are required to do. If a fund manager is outperforming his or her benchmark, Modern Portfolio Theory states that one shouldn’t be able to do this without taking on too much risk . . . by definition a POSITIVE RETURN versus its benchmark would be labeled as risk!.
 
Jeff: 
Okay. Let me see if I have this right. Let’s say a manager uses the Dow Jones Industrial Average as their benchmark.  Now, let’s say the index goes up 10% one year, but you  . . . as a solid fund manager . . . get a 15% return. You’re telling me that’s a bad thing?
 
John:
It should be good news. But in the fund management world, it can be bad news, because that extra return is called 'volatility'. And the industry uses fund rating 'metrics' that would suggest the fund has strayed too far from it's benchmark. According to Modern Portfolio Theory, it must be a risky fund. So, large pension consultants who control billions of dollars might pull their money OUT of the fund.
 
Jeff:
So, instead of doing a great job, fund managers are actually encouraged to fall in line with the benchmark.

John:
Exactly. However, when you add in the fund’s fees, a fund manager is virtually guaranteed to underperform their benchmark over time.

Jeff:
Let me see if I can sum this up. The permanent flaw is that fund managers will underperform their benchmarks because of excessive fees and because of Modern Portfolio Theory.
 
John: 
Yes. However, let me be clear. There are great fund managers out there. I’ve met them. I know them personally. These are very smart . . . very talented folks. But, they are essentially handcuffed by what they can and cannot do.   
 
Jeff:
A lot like a NASCAR racer being asked to win when he has a governor on his car.
 
John:
Precisely.
 
Jeff:
Now in a short bit, you are going to talk about these talented fund managers, and how our audience can access their top stock picks by using your Alpha 15 Portfolio, the exact same portfolio I will be using for the $1,000,000 Newsmax trading account. But I’m curious, how do these great fund managers decrease fund performance to match the benchmark?
 
John:
They do it by over-diversifying. They load the portfolio with hundreds of stocks, because . . .  as we have all been told . . . diversification is good. But this over-diversification is like gravity . . . it brings down the total returns of a portfolio, so that the big returns of the best stocks are evened out by the rest of the holdings.
 
Jeff:
Steve, one of your contributors wrote that the #1 reason managers underperform is too much diversification. Even, Warren Buffett, perhaps the greatest investor of all times, said “Diversification makes little sense if you know what you are doing.” What are your thoughts on this . . . is it okay to have a hand full of stocks?
 
Steve: That leads to a very interesting question. We did an article on Forbes.com on this, is what is going to happen to money managers in the future? They may become financial advisers instead of managing portfolios and underperforming. It might be a good use of their brains, that we are not getting value added right now. Because you have all the best brains in the world trying to manage money, so that means to get an incremental gain, you have to either be lucky or take outsized risk. And so I think the markets will eventually sort this out, we will have more use of index funds, but you will also have more sophisticated use with a trusted advisor in terms of meeting your own particular needs for your working years and your retirement years.
 
Jeff:
So true. John, Steve mentioned that it takes a lot of hard work to get your hands on the few stocks that are truly going to outperform the market.  But, in a moment, you are going to show us how your Alpha 15 Portfolio has less risk than the stock market – which consists of thousands of stocks . . . yet as the name suggests, your portfolio only has 15 stocks.
 
John:
That’s correct. Our 15 alpha stocks has shown less risk than the stock market as measured by the S&P 500.
 
Jeff:
Before you talk about that, let’s talk about what drove you to this point. You have spent over 20 years as an advisor. And you’ve put a lot of hard work over the last two decades studying this “permanent flaw” of fund underperformance.  A few years ago, you had an “aha” moment when you came across this white paper that confirmed your theory about this permanent flaw. Talk about that.

John:
Sure. In 2012 I came across this white paper by Cohen, Polk, and Silli . . . professors at Harvard Business School and the London School of Economics.
 
Jeff:
So we are talking about high level academic research here.
 
John:
Correct. This white paper specifically pointed out the permanent flaw of fund underperformance that we’ve been discussing.
 
It proved, as I had very much suspected, that the fund managers are not to blame since they are forced to over diversify in order to mimic their index — and along with the fees that are a part of every actively managed fund . . . over time . . . these managers underperform. 
 
Jeff:
So the fund managers are actually good?
 
John:
Yes, I know these guys, and they can be brilliant, but they know they are handcuffed by the industry as to what they can and cannot do when it comes to investing. So, I began to ask myself . . . instead of paying managers to continually underperform — which MOST of them do — why not instead 'take' ONLY the best stocks from these "handcuffed" managers? And when I coupled this idea with compelling academic research that told me I was correct, I believed I could outperform the stock market.
 
Jeff:
Talk about that for a bit.

John: 
I did some more research. And I found that a fund manager’s excess returns — that’s the money they earn over and above their benchmark — is derived from about 20% of their holdings.  Think about that.  That means 80% of their holdings are in dead weight stocks. It's the 80/20 rule . . . if you will . . .  that's so true in many aspects of life.
 
Jeff:
So, for every $100 dollars that an investor puts into a mutual fund, only $20 goes into the good investments that can outperform the market. The other $80 is allocated to – what you call - “dead weight” stocks.

John:
Exactly. The remaining $80 goes to stocks that the manager is required to have in the portfolio in order to be “diversified” under Modern Portfolio Theory. Essentially, fund managers are forced to add stocks they don’t need just to make sure they manage money to the benchmark. 

Jeff:
Maybe I missed this, but, why can’t a fund manager say “to hell with it. I’m investing in my top stocks.”

John:
Fund managers make the bulk of their money from the total assets they have under management.  And the people responsible for allocating money to that fund, the retirement plan providers and their consultants that oversee billions and billions of dollars, only want managers who are within a narrow range of their benchmark.
 
Jeff:
Ah . . . because Modern Portfolio Theory states that the managers that track the benchmark are more stable than managers who don’t closely track their benchmark.
 
John:
That’s right.  A mutual fund is a business.  And a fund manager relies on steady performance — not outperformance — to stay in business. In fact this white paper speaks to this directly. If the manager strays too far from the benchmark . . . up or down . . . he won’t be selected for new allocations of capital.  So his business won’t grow, and if people start pulling funds, the manager could be out of business.  In fact there are fund 'survivorship' statistics that are part of the industry conversation right now.  The bottom line is that the managers are incentivized to get mediocre returns, not great returns.  
 
Jeff: 
As you mentioned, it’s not the manager’s fault then for this mediocre performance, no more than it would be the fault of a great NASCAR driver to underperform if he had a governor on his engine. The regulations and legal risk completely disincentivize the manager to outperform the market. 
 
John:
As the white paper points out, a manager’s excess return . . . or the return above the overall market, what’s known in the industry as a portfolio’s “alpha” . . . only comes from 20% of a fund manager’s holdings.  These are what I would call their Alpha stocks — a concentrated group of stocks that the manager has a high level of confidence in, but can’t allocate enough money to.
 
Jeff:
So, again, the other 80% of the stocks are just there to “govern” the portfolio and keep it within the rules — essentially dragging down the overall return. So how do you find the top stocks . . . you know a lot of these fund managers, is this something that fund managers will tell you, or was there an insight from analyzing the white paper written by the Harvard and London School of Economics !?
 
John:
No . . . it’s not something fund managers would really want to talk about, but having an understanding of the inherent fund and industry flaws provides a big opportunity. You see, when I first saw this research study, it caused me to look at every mutual fund portfolio with a new lens.  I started to focus only on the strong stocks in the manager’s portfolio — the “alpha stocks” — the ones that outperformed the market.  And my thinking was if you ONLY allocated money to a portfolio that invested in a manager's highest conviction stocks, ignoring all of their other holdings — then a portfolio of these best stocks should outperform the benchmark. Another way I looked at this was by asking the question:  if almost all of a fund's performance came from only a few of the manager's highest conviction stocks — then why would I want to buy anything other than just their high conviction holdings? 
 
Jeff:
That makes sense. Now, I’ve seen first-hand how you developed a system to identify these alpha stocks. As mentioned earlier, my team was so amazed by the results that we had it back-tested by a professor at Duke University. He found that your system, over the last several years, has been able to beat the stock market by nearly 7:1. That’s a cumulative return of 424% vs. the stock market’s return of 63%.
 
I want to talk about these rock solid results some more in a moment and how our viewers can access these alpha stocks on a regular basis . . . just like I’ll be doing with $1,000,000 Newsmax trading account . . . but first, tell us how you discovered these stocks.
 
John:
Well, the trick of course is finding the best fund managers, and then finding their top alpha stocks.
 
Jeff:
So how do you go about finding the top fund managers? That seems impossible considering there are over 7,000 fund managers out there.
 
John:
It would be a very difficult task for most people, Jeff. But, remember this is what I do for a living . . . a core part of my career for the last two decades has been researching and selecting the top performing fund managers to oversee more than $1billion in retirement plan assets.
 
Jeff:
So, how do you go about doing this?
        
John:
I use both quantitative and qualitative metrics.  This is just another way of saying . . . one . . .   I focus on metrics that are “measurable” and then two, I focus on metrics related to quality – the more subjective conditions.  
 
Jeff:
Let’s talk about quantitative first.

John:
I’m looking at quarterly performance, turnover and related data.  Basically, how the manager performs in relation to its peers, the turnover in the portfolio, the 5 year returns, etc. I have a proprietary system that allows me to do this.
 
Jeff:
So once a fund manager passes the screening of the quantitative analysis, you apply qualitative analysis . . . which is a bit less measurable. How does that work? Is it a matter of meeting these fund managers in person?
 
John: 
Well after selecting fund managers for more than two decades, I’ve developed a systematic checklist of all the values that I think are important for a high quality manager.  These include the manager’s investment approach, security selection process and the capabilities of their research team.  I also look at organizational structure and how the manager implements their buy and sell processes.  I even go so far as to get on manager conference calls and take note of their leadership and company culture. 
 
Jeff: 
Got it. That’s something only you can do. So quantitative first, then qualitative second . . . and that will bring you to the top 5 fund managers out of the 7,000 managers out there!
 
John:
Yes.  The key here is to have a systematic, repeatable, rules based method for analyzing fund managers.  And I do this every quarter to assess the current top 5 fund managers. I usually end up replacing a few of them over the course of several years. 
 
Jeff:
Is that necessary? I mean, isn’t a great fund manager always going to be a great fund manager?
 
John:
You would think so, but reality is sharply different. Going back to NASCAR, the top 5 drivers this year will be different than the top 5 drivers next year, even though the pool of drivers doesn’t change much.
 
Jeff:
But a few remain on the top year after year.
 
John:
Yes, but I want to be able to see any early signs that a manager may be drifting off course — not sticking with their knitting if you will, and in that way, I can rotate managers out as needed.
 
Jeff:
Okay, so step one is finding the top 5 managers. You do that through quantitative and qualitative analysis. So, once you’ve selected the best managers, how do you then identify their best performing 3 stocks? There is still a pool of hundreds of stocks or more in their portfolios. What do you do . . . just look at their top 3 holdings?
 
John:
Good question. Looking at their top holdings – meaning the ones they have the most amount of money in - is actually the last thing you want to do.
 
Jeff:
Why? It seems like these are the stocks the managers would have the most conviction in since they own the highest amount of them.
 
John:
It’s important to understand that those stocks probably already made their move. The reason they are the highest isn’t because the managers have the highest level of conviction . . . it is because the fund manager typically picked that stock months or years earlier. The stock just did well and therefore increased in price, making up a larger percentage of the overall portfolio. That’s why it’s the highest.
 
Jeff:
That makes sense. So, to your point, the stock already made its move. You want to buy the stocks before they make their big move up. Or, as you say, finding the stocks that the manager has the most conviction in. So, how do you go about doing that?
 
John:
First, I look at the stocks that the top 5 fund managers hold in their portfolios. Then, I use a rules-based proprietary process for evaluating the manager’s conviction for each stock in their portfolio.  I could go into the details on this, but the gist is that the overall process involves a variety of preset metrics and algorithms.
 
Jeff:
Give us just one example, if you could, that our audience might understand.
 
John:
Well, one metric I use is the month over month change in acquisition of shares. That probably seems obvious . . . I want to see if the manager is buying more shares or selling more shares. Now, that may sound like a simple thing to look at, but it’s not. You have to weigh that against other metrics, because, remember . . . Modern Portfolio Theory is forcing these managers to buy stocks they don’t want in order to meet the benchmark.
 
Jeff:
So you have to weed out the stocks the fund manager has to buy . . . versus the ones they have the most conviction about. I see.
 
John:
Exactly. And once a stock is selected for the Alpha 15 Portfolio, it is continually monitored for ongoing conviction or changes by the fund manager.
 
Jeff:
So, the goal is to always have the top 15 stocks by finding the 5 best fund managers, and then finding their 3 best stocks.
 
John:
That’s right. It’s important to have the same buy and sell disciplines over and over again.  This is how you eliminate emotion from the equation and build a portfolio of performing stocks — even in tough markets.
 
Jeff: 
It seems that with the changing of managers and the changing of stocks, that there would be a lot of turnover in the Alpha 15 Portfolio.
 
John:
There can be a fair amount. Every quarter I change out about 5 or 6 of the stocks.
 
Jeff:
So, roughly 2 trades a month. That seems manageable.
 
Now, I am sure you can see why John’s Alpha 15 Portfolio was so attractive to me when I first saw it. John does all the heavy lifting, and since Newsmax has the exclusive license for every one of John’s Alpha 15 trading signals, he lets me track his Alpha 15 Portfolio directly. And in just a moment, I am going to reveal how you too can follow this portfolio and start grabbing big profits for your own account.
 
And frankly, the results are amazing. I literally did not believe them at first, which is why I had them back-tested and verified by a Professor at Duke University.
 
And you can see the results for yourself on this chart. Over the course of the last several years, you could have recorded cumulative gains of 424% — of course that doesn’t take into account trading costs or taxes, but when you compare that to the stock market, which only achieved gains of 63% . . . That’s beating the stock market nearly 7:1.

Or, to put it another way, that’s turning every $10,000 into $52,400. While that same, $10,000 placed into the stock market would have only turned into $16,300 . . . that’s a $42,400 gain versus a $6,300 gain.
 
John:
Of course, that’s before you count any fund fees. If you assume a 2% fund fee, the final amount would only be $12,984 . . . or roughly $3,000 in gains.

Jeff:
So what we are really looking at here is a $3,000 profit versus a $42,000 profit, and all made with less risk.
 
I think those of you  watching can see why we are so excited about the Alpha 15 Portfolio . . . why Steve Forbes has been willing to be a part of this broadcast . . . and why I am putting one million dollars of Newsmax’s money into John’s system
 
Now, John . . . this is all great. But, what happens if the market crashes again . . . like it did in 2000 and 2008.
 
John:
In 2008, stocks collapsed by 56%. It was a tough time for investors.
 
Now, if we look at the chart again, you will see the Alpha 15 Portfolio took a big hit during that time. But, the portfolio never went in the negative . . . unlike the stock market.

So after that crash, I wanted to make sure I didn’t miss anything that could help the portfolio sidestep any catastrophe . . . no matter how bad the market got.
 
Jeff:
And what did you find?
 
John:
I found that the stringent sell disciplines that I built into the system, performed exactly as planned. Even considering key market metrics I use to let me know that things may head south — metrics like Stock Market Capitalization to GDP Ratio and a Market Price Earnings Ratio — it was still a better bet to stay invested in the Alpha 15 Portfolio and follow a rules based system than it was to try and time the market.
 
Jeff:
So you have these key metrics that help you see when the market is overheating . . . or possibly due for a correction . . . but because the buy and sell rules of the Alpha 15 Portfolio are so strong it’s better to stick with the system as opposed to trying to time a market top.
 
John:
That’s exactly right.
 
Jeff:
It sounds like you have your eye on both the forest AND the trees.  I know some of our viewers may be new to investing or may still be a little gun shy from the last crash so knowing that you have an eye on the overall market as well as the Alpha 15 Portfolio will give them some added comfort.
 
John:
Fact is, it’s my job. Remember I oversee more than $1 billion in client assets which includes both sophisticated and novice investors alike.  And during these volatile times my clients want to know that I have an eye on broader market moves as well as their individual portfolios.
 
Jeff:
One thing that impressed me most, is the beta of the portfolio. Can you explain that quickly?
 
John:
Sure, beta is a measure of risk against a benchmark. A normal beta is 1 . . . so a beta higher than 1 means more risk . . . while a beta lower than 1 means less risk. I can see your eyes glazing over, so . . . let’s go back to NASCAR. Let’s say a normal lap takes you 30 seconds. So if you drive a lap, and it takes 30 seconds . . . that is a beta of 1. If you drive a lap, and it takes you less than 30 seconds, that is a beta less than 1. If it takes over 30 seconds, that is over 1.
 
So, lower beta is good. Higher is bad.
 
Now, the industry tells us, the more stocks you own, the lower your beta – the less risk – you should have.  But, when we measured the beta of the Alpha 15 Portfolio — which, of course has only 15 stocks . . . it actually had a lower beta than the market . . . it was at .89.  That’s lower than the risk of the broader market as a whole.
 
Jeff:
So owning fewer stocks was actually not only more profitable, but also less risky . . . less volatile.
 
John:
Yes. There's quite a bit of research on the benefits of a concentrated portfolio — meaning holding fewer stocks. But when you think about it, is that really surprising? I mean, how can a fund manager holding 200 companies outperform their benchmark . . . especially if their portfolio is almost a 'mirror image' of their benchmark?  The point is, 15 stocks is proven to provide an appropriate level of both diversification and risk — which is precisely what I am able to do through the Alpha 15 Portfolio with 15 stocks.
 
Jeff:
You know what I like about your system . . . it has no emotion to it. Most of us get emotional about investing . . . but your system doesn’t. It sticks to the plan.
 
John:
We all get emotional. In 2008 when the stock market was tanking, it turned my stomach. It made me question a lot of things. Thankfully, I was prepared emotionally for something like this. I was able to step back from the situation, and remember the basic principles of investing . . . just like following a flight checklist every time I fly a plane.
 
Jeff:
That’s right . . . you mentioned in one of our prior meetings that you are a pilot.  If I recall, you fly a vintage airplane — with doors and windows open to the world.
 
John:
I do. Flying by stick and rudder with the wind in your face is a lost pleasure in today’s high tech world.  But no matter what type of plane you fly there are fundamental flight checklists that can save your life . . . be it a pre-flight checklist before takeoff, or an emergency descent checklist when things go wrong.  To fly safely you follow the same routine checklists every time you fly.   And it’s paying attention to the repetitive . . . systematic . . . tasks that are the difference between life and death — whether it’s flying a plane or investing in the market.
 
Fact is, when the market collapsed in 2008 most investors didn’t have a systematic checklist to keep them from crashing. I saw friends and family get hurt just like everyone else. I personally watched thousands of people pull their money out of the market at the exact wrong time. Witnessing this behavior is part of the reason I decided to formulate my Alpha 15 Portfolio, and then find a way to make it available to everyday investors regardless of their skill or experience.
 
Jeff:
Well, Steve Forbes and I are proud to be a part of this broadcast with you. When my team and I first met with you a few months ago, I can’t lie, we were skeptical. We get calls about investment systems nearly every week. But after we sat down together and you showed us what you had in mind, we knew right away that you were the real deal. However, we didn’t stop there. We wanted to see how your system could perform in any stock market.  Can you share with our audience a couple of those examples?
 
John:
Of course.  First, take a look at this calendar. You will see on the left hand side the 15 backtested positions that make up the portfolio. The starting date was the second quarter of 2002.
 
Jeff:
Why did you start there?
 
John:
It was 2012 when I finally had enough data to start my in-depth back testing. I just went back 10 years to validate my system — through a full market cycle. And I’ve continued to perfect my approach ever since then. In fact, going back 10 years was a tough thing to do because the market actually dropped significantly in 2002. In the second quarter alone the market dropped 15.52%. Take a look at this chart.

Now let’s take a look at the stocks that were in my portfolio . . . you will see everything from a real estate company.

Jeff:
So, how did they do?
 
John:
When you compile the stocks, we finished in the green . . . we were up about 2%.

Jeff:
Now, that doesn’t sound like a lot . . . but as you said, the market was down roughly 15% . . . so your back tested portfolio outperformed the stock market by 17 percentage points right off the bat.
 
John:
That’s correct.
 
Jeff:
Why don’t we fast forward a bit and see how your portfolio did when the stock market rebounded in 2009.
 
John:
No problem. The big rebound happened in the second quarter of 2009. During that time, stocks shot up 17.24%.
 
Now let’s look at what the 15 stocks did in the portfolio at that time. This would include Bassett Furniture, Granite Construction, SkyWest Incorporated, Tidewater, and Westar Energy . . . for example.

Jeff:
Two things John . . . first, I have not heard of a lot of these companies. Which is nice. I don’t need you telling me to buy companies that I already know about. Secondly, I like how – even though the portfolio is only 15 stocks – they are diversified across various industries.
 
John:
I think your point about diversification across the different type of companies is important . . . and a lot of these stocks are companies that are on the rise . . . that is why you haven’t heard of them. The best fund managers can find these companies . . . even though most investors have never even heard of them. Let’s look at how they did compared to the market.
 
Jeff:
A rise of 18.5% . . . so the Alpha 15 Portfolio beat the market by a small margin.

John:
Correct.
 
Jeff:
It works for me. What about a more recent example of the portfolio?
 
John:
These charts are for the fourth quarter of last year.  During that time, the stock market went up 9.05%. Now let’s take a look at the stocks in the Alpha 15 Portfolio.

Jeff:
It had a lot more stocks I am not too familiar with. You know, Can you break these out for me at all?
 
John:
Of course. Here’s the way the back tested returns played out. You will see a few stocks actually went down during this time . . . like Conway, Delta Apparel, and Rent-A-Center. But, those losses were easily offset by some big wins like 35% gains in Encore, 31% gains in Huntington, and 24% gains in Olin. Overall, during that quarter, the Alpha 15 Portfolio went up 14% . . .

Jeff:
Again, beating the returns of the stock market . . . this time by roughly 5%. Over time, outperforming the stock market really adds up. Based on the back testing done by the professor at Duke University, your portfolio, over the last several years, has returned 424% while the stock market has returned a paltry 63%.
 
John:
And as said earlier, most people didn’t really get 63% returns due to the fees they paid to fund managers.
 
Jeff:
True . . . so . . . by using your rules based system to find the top 5 fund managers, and then find their top 3 stocks each . . . you end up with the Alpha 15 Portfolio. This portfolio sidesteps the permanent flaw that can cost thousands . . . if not millions . . . to investors, helping them retire younger and live a more prosperous retirement.
 
John:
Yes — it's designed to do just that. And, I believe it also gives you peace of mind knowing that your investments are being tracked by an unemotional, rules-based system. 
 
Jeff:
This is fantastic John.  As Steve mentioned earlier, if you want to get your “Inner Buffett” going, you have to do your homework . . . you have to do the hard work of drilling down on the handful of stocks that can make a difference to your portfolio. 
 
It’s clear John that you have done the hard work here.  And I know many of our viewers will see the Alpha 15 Portfolio as a way to take back the profits that the mutual fund industry has been robbing them of for years.
 
Steve, we’ve taken up considerable time talking about the Alpha 15 Portfolio. A lot of people who are tired of paying high fees to their money managers, like to invest on their own . . . some people are great at doing this, but in your opinion, are they an exception or is it normal for one to beat the market on their own
 
Steve:
There may be exceptions out there, but you have to be very, very careful of them. Everyone is trying to re-invent the wheel. And the bottom-line is, a few simple rules in terms of investing will do you, over time, far better than trying to be sophisticated and trying to have some fodder for cocktail chatter to show how brilliant you are. Most of us aren't brilliant, and Charlie Ellis, a money manager from Connecticut, once put it best. He said "You should approach investing like the game of tennis. Recognize you aren't going to go to Wimbledon. You aren't going to the U.S. Open. Just focus on getting the bloody ball over the net and within the lines." And if you take that approach to investing, you'll do better than trying to be Fancy Dan out on the courts.
 
Jeff:
Well I know I’m not going to Wimbledon anytime soon.  And it does seem to be the exception for one to be able to beat the market on their own. That’s why I am personally betting on John’s system . . . and investing a million dollars of our firm’s money in it.  That’s how much I believe in what John has put together. The Alpha 15 Portfolio seems to benefit from the use of a rules based system, instead of trying to time the market.
 
Steve:
You can't time the market. And over time the market is your friend. And one of the toughest things to do is when the markets become volatile, when they start to go down, is to say "I'm going to stay in and put my quarterly or monthly money into the market." And so because human nature is what it is, I always advise people, with your retirement money, take that disciplined approach. With your inner-Buffett, if you're trying to beat the market, or if you feel you have particular needs that require special cases, doing things differently, then do that with your non-retirement money. That way you won't let emotions wreck your retirement.
 
Jeff:
John, this is in line with what you’ve shared.  Investors need to get in the market and stay with it.
 
John: 
Steve is right . . . you can’t time the market.  As I mentioned earlier I do have my eye on market indicators that tell me when the market is overheating. And for those investors who are risk averse and can’t stomach a market downturn they could move some money off the table as the market risk rises.
 
But, in the long run – if you have several years to invest – you are simply better off following the Alpha 15 Portfolio.   Remember, the Alpha 15 Portfolio has a lower beta – less volatility – than the market as a whole. I firmly believe when you focus on only the top stocks, you will outperform over time, and with less volatility — no matter how bad things look in the broader market. 
 
Jeff:
John.  This has been fantastic. Thank you for taking the time to share your Alpha 15 Portfolio with us.   And in just a moment, I will show our viewers how they can follow Newsmax as I put a million dollars to work in your system, and more importantly, how those watching can start using the Alpha 15 Portfolio for themselves right now . . .
 
John:
Jeff, it’s been my pleasure. Thank you for having me.  And thank you Steve for your contributions as well.
 
Jeff:
Steve, Thank you for joining us and sharing your insights with our viewers as well.
 
Steve:
Very pleased to be a part of it, and thanks for having me on. Thank you.
 
Jeff:
And I want to thank you — our viewers — for joining us today as well.  At the outset of this broadcast I announced that I would be investing one million dollars of our Company’s money into John’s system.  This is a first for Newsmax in the history of our company — but when I saw the power of John’s Alpha 15 Portfolio I knew this was an absolute game changer for anyone who was ready to grow massive wealth with less risk.

You see, when we enlisted the professor at Duke University to back test John Shubert’s Alpha 15 Portfolio, we just wanted to make sure the math was rock solid, and John’s rules based system could knock it out of the park.  But when we finally got the results back form the professor, we were absolutely astounded. 
 
John’s Alpha 15 Portfolio rocketed higher by 424% while the S&P 500 managed a paltry 63%.  John’s portfolio beat the overall market nearly seven times over — enough to turn a simple $10,000 investment into $52,400.
 
Think about that for a moment . . . investing $10,000 in the stock market would have given you a $6,300 profit  . . . while investing that same $10,000 in the Alpha 15 Portfolio would have given you a $42,400 profit, and all with less risk!
 
Best of all, it doesn’t matter how much money you have to invest.  Whether you have $1,000 or a $100,000, just think what you could do with nearly 5 times your money in retirement. 
 
What would you do with all that money?  . . . Travel more?  Maybe buy a vacation home?  Or maybe pay off your existing home, and spend more time with family without ever worrying about running out of money in retirement.
 
There’s no doubt that a massive investment crisis is looming on the horizon, and millions of Americans who don’t take action now will feel the pain of this crisis for many, many years to come.  
 
But because you took action and made the decision to join us for this Investment Crisis Summit, you already have a way out — a way to dodge this retirement crisis bullet with less risk and more profits than the average stock market investor.
 
Candidly, we here at Newsmax were already confident in John’s ability to manage money, especially as he has proven himself for more than 20 years in the business . . . overseeing $1.5 billion in assets, and earning the respect of his peers and colleagues as a Morningstar nominee for the “401(k) Advisor Leadership Award” and an advisory board member of one of our nation's largest financial firms..
 
But all this aside, when the stellar returns of John’s Alpha 15 Portfolio hit our inbox from the Professor at Duke University, we went from 100% confidence in John to 100% commitment. 
 
That’s why we bought the exclusive global license for John’s investment system, and why I’m putting $1,000,000 of Newsmax’s money to work in the Alpha 15 Portfolio.
 
I’m banking on the fact that this $1,000,000 check from Newsmax [Jeff holds up check] could hit $5,240,000 in the next few years.  That’s FIVE times our money.
 
And here’s the best part!  You can watch our every move as we do it.  
 
Now, I had originally planned on letting you look over my shoulder as I make the trades . . . so you could follow in my footsteps . . . but due to industry regulations you are going to have the upper hand.
 
You see Newsmax’s licensing agreement gives us exclusive access to every buy and sell signal that John’s system produces . . . forever. 
 
Now for the crazy part . . . due to industry regulations, if we share these trading signals publicly, we are prohibited from acting on them for at least 48 hours. 


But in light of this looming investment crisis and the millions of Americans that are being financially crippled by the permanent flaw in the industry, our minds were made up.
 
Delaying our personal trades by 48 hours was a small price to pay for getting this revolutionary investment system into the hands of as many people as possible. 
 
So, here’s how this is going to work. 
 
When John’s Alpha 15 Portfolio triggers a new investment alert – such as selling one stock in the portfolio for another stock, I will send you an email . . . this way you can make that trade if you choose . . . then 48 hours later, I will follow suite.
 
It’s that simple. 
 
This way you are always assured to get the best possible price, before we put big money into each trade.
 
So whether you’re new to investing or a seasoned pro, you can easily start grabbing big gains from John’s system before we do . . . since you will always be one-step ahead on every move we make.
 
The bottom line is that the looming investment crisis is very real, and we want you to have the confidence that you can use John’s Alpha 15 Portfolio to overcome the permanent flaw that has plagued individual investors for years.
 
No longer will you have to fall victim to an investment industry that is putting 80% of your money in dead weight stocks to keep fund managers in business at your expense.
 
But you must act now.
 
For today only, we have designed a special VIP Package for everyone who’s joined us for this Investment Crisis Summit. A Package that will give you every stock pick and every buy and sell signal, directly from John’s proven system. 

Best of all, you’ll be able to get your hands on each and every money making trade for less the price of a cup of coffee.  But before we get into the details on how you can get started raking in the profits with the Alpha 15 Portfolio . . . here’s what you will receive when you take advantage of this special offer today.
 
First off, you will receive our investment service called the Alpha 15 Portfolio. Through this investment service, I will reveal every “high conviction” that John’s rules based system identifies.  That means, out of the thousands of funds and thousands of stocks he’s screening every day, you will get the precise stock picks that could well send your portfolio soaring. 
 
In this service, I will personally show you how to act on every money making trade.  This way you can be 100 percent sure you understand when to get in and out of a position for maximum gains.  In simple terms, you will sit over my shoulder and watch as I explain every key strategy and trade for grabbing consistent gains from these “high conviction stocks”.
 
➢         Trade Alerts. When it’s time to invest, you will get a TRADE ALERT directly from me via email.  This way you immediately get every buy and sell signal so you can take action and grab massive profits.  Plus you will get every trade alert 48 hours in advance of any move we make. .  In your Trade Alert I will tell you what to buy, at what price to buy, and how long you can expect to hold the position. And when it is time to sell, I will send you another email telling you exactly what to do. You simply make the final call by going online to make the trade or reaching out to your broker. You can expect to get around 6-8 trades every quarter. And it should only take about 15-30 minutes for you to execute the trades. But it will be time well spent as you seize control of your financial future . . . it’s just that simple!
 
➢         In between the Trade Alerts, you will receive Weekly Updates from me where I will show you EXACTLY how John is lining up the trade . . . and how you can make money on it right away.  I’ll be like a coach at your side, telling you how to stay in the game for maximum gains — no matter how fierce this investment crisis becomes.
 
➢         And for those of you who are new to investing, you will be pleased to know you will get our Investing 101 Guide. This is an easy-to-read book that explains in simple terms how to get started investing in the market. It literally tells you what a stock is, how to open an account, how to place a trade . . . and so much more!  So no matter where you are when it comes to investing, I will make sure you have 100 percent confidence in using the Alpha 15 Portfolio.
 
➢         You will also receive instant access to the encrypted Website. This website will host every weekly update, every trade alert, and all the other materials you could need to stay on track and keep raking in the gains.
 
➢         Additionally, you will get robust Customer Service Support. You will have your own dedicated order ID and account number that gives you priority access to the Alpha 15 Portfolio customer service team. This team has more than 50-trained customer service representatives who are ready to assist you by phone, email, and fax.
 
And last but not least, there’s one more thing that will take away any lingering hesitation you may have for getting started with the Alpha 15 Portfolio service right now.
 
My publisher has agreed to offer a 90-day risk-free guarantee for all VIP attendees who sign up right now, that is of course if you are one of the first 1,000 people to respond to this offer today.
 
This means, if at any time during the first 90-day of your subscription . . . you aren’t 100% completely satisfied with what you receive with me and the Alpha 15 Portfolio . . . or if you just feel that John’s system isn't for you . . . all you need to do is contact our customer service team, and we will immediately refund the entire cost of your paid subscription . . . no questions asked.
 
And just think, the amazing part about this guarantee is that you’ll have more than enough time to make your first few trades and start seeing the profits roll in . . . long before your trial period ends. .
 
You may be thinking, why would we stack all the odds in your favor on an offer like this? 
 
The reason is simple.  John Shubert and I are 100 percent confident that you could be making money with the Alpha 15 Portfolio right away. 
 
And after you start to see the money pile up in your own account, you’ll be glad you took advantage of the ridiculously low price we’re offering for immediate access to John’s revolutionary investment system.
 
But you are going to have to act fast. 
 
This offer is guaranteed only for the first 1,000 people that respond today. So don't wait a moment longer to get everything you need to start raking in massive profits with the Alpha 15 Portfolio.
 
And don’t forget, I’m putting $1,000,000 of our own money in the Alpha 15 Portfolio and will be trading right alongside you.  This way you can rest assured that you never have to go it alone when you choose to subscribe to this groundbreaking investment service.
 
The bottom line is that I want you to have absolute confidence that you can take control of your financial future and live a carefree retirement.  And John and I are going to be here every step of the way.
 
But don’t wait.  You must act today.
 
Enroll now by clicking the button below . . . when you do, you will get all the details on this limited-time offer and everything you need to start grabbing massive gains from the Alpha 15 Portfolio right now.
 
Thank you

Yes - I want to team up with Jeff and John!