Picking up from the question of whether any of the financial newsletters we find offered in our daily mail can make us money ...

Some undoubtedly can. But which?

"Would you pay $5 per month to find out whose investment advice really works?" asks an envelope. To which the sensible reply is, "No, but I'd pay $5,000 a month to know whose will." For there's the problem. It's easy to find newsletters (or mutual funds or brokers or crapshooters) who've had a great couple of years; not at all easy to judge which will.

The concept of a $135-a-year newsletter called the Hulbert Financial Digest, which tracks the performance of a variety of other newsletters, is to find the ones with the hot hands and climb on board while they're hot, then deftly abandon ship (before everybody else does) when their hands begin to cool. Never mind that most of your gains, if you have gains, will likely be short-term and thus heavily taxed. It's particularly important to bail out ahead of everyone else when a letter has developed a following. When 5,000 of you go to sell 300 shares apiece of some $13 stock — well, 1.5 million shares may be more than the market can absorb in one day without the price slipping a point or four. (Indeed, the hot hands get hotter, at least for a while, because their recommendations are frequently, in the short run, self-fulfilling.)

One of the hottest hands over the past five years has belonged to Dr. Martin Zweig, whose $245 Zweig Forecast is published every three weeks, with special bulletins when conditions warrant and a hotline you can call for daily comment. Marty Zweig is a smart and personable fellow. Whether paying him $245 a year will greatly improve your lot in life I cannot say. On the back page of each newsletter, there's a listing of his open positions (the things he's recommended you buy) along with the paper profit or loss you would have made on each one. At the bottom of the list is a figure for average profit: 12.9% in the most recent letter, although I don't believe it takes into account brokerage commissions or taxes.

This figure doesn't attempt to include all the wonderful profits you may have reaped from Dr. Zweig's past recommendations — only the profit or loss on the position he suggests you still hold. It's not a weighted average in any way — just the sum of sixteen profit and loss percentages divided by sixteen. What's interesting to me is the temptation Dr. Zweig must be under not to recommend sale of the first two entries on his list, IBM, up 66% from where he recommended it in July 1982, and Walgreen, up 98.5%. In fact, a footnote shows he sold half these positions at significantly lower prices ... but has not yet had the heart to recommend sale of the other half. In part this may be because he thought IBM, even when it hit 130, was still cheap (he had sold the first half at 83), and in part — if he's human — because he hated to see that winner removed from the top of his list in every subsequent issue of the newsletter. Likewise Walgreen, which he had bought at 17. Half he sold at 25, but the other half he recommended holding even when it hit 40. Was it really, at 40, one of the sixteen best buys he could find for his subscribers — or would it simply have been a shame to have to drop it from his list? Without those two magnificent holdovers, IBM and Walgreen, the average gain before commissions and taxes on the other fourteen open positions in the issue of the newsletter I'm looking at would have been 3%.

It's got to be a nightmare to have tens of thousands of people scrutinizing every investment decision you make, so I sympathize with Dr. Zweig if he held onto IBM and Walgreen to keep the back page of his newsletter looking good (and I have no proof that he did). The nightmare is in part ameliorated by the $245 a year each of those tens of thousands of onlookers tosses into the pot, but let's not begrudge The Zweig Forecast that money. In 1981 and 1982 followers of Zweig's recommendations would have gotten it back in spades and shovels and wheelbarrows. Zweig was great. In 1983 and at least the early part of 1984, they could have done about as well as Zweig in a Sealy Posturepedic. [That's a mattress, kids.] However, for 1985 Zweig's recommendations are likely to be extraordinarily good, as they were in '81 and '82; or else not so good, as they were in '83; or else kind of rotten, as they were on rare occasion way back when. Who knows? The $225-a-year Option Advisor newsletter, reports Hulbert in his digest, was up a spectacular 97.9% in the first quarter of 1984. On the other hand, it was down 93.4% in 1983. So, if you'd invested $10,000 according to its recommendations in 1983, you'd have been down to about $660 by the start of 1984, and then that $660 would have doubled.

And how can we forget Joe ("I can never be wrong again") Granville, whose market-shaking predictions you could have received for $250 a year, or when he was really hot, by watching the nightly news? Granville was great for a while, except that those who stuck with his advice would ultimately have been taken to the cleaners. ("My name's Granville, not God," he eventually shrugged.)

Howard Ruff has a newsletter. Subscribe and you get a free LP, on which Howard sings "If I Were a Rich Man," "Hymn to America," "I Walked Today Where Jesus Walked," "My Way," "Climb Every Mountain" and "The Impossible Dream" ... and/or copies of all Howard's outdated hardcover books. The newsletter is largely occupied with introducing additions to the Ruff family (he has 30 or 40 kids and grandkids), spurring readers to political action (he has his own lobbying organ), and promoting new or affiliated newsletters. He has great skills as a communicator and marketer, substantial skill as a singer and financial analyst.

He will start one newsletter with an anonymous, and possibly fabricated, letter so he can defend free enterprise and the profit motive ("Dear Howard: Why are you always trying to sell us other newsletters, coins, books and cruises? All you care about is getting rich. You're greedy."). He starts another by chewing out impatient subscribers who wonder why gold and silver still haven't gone up. The mystery of it is that he actually has more than 150,000 fans paying $89 a year (and more) to cheer him on.

He's the misunderstood multimillionaire underdog, fighting valiantly against the big bad Government, and the fact that his investment advice is sometimes good, sometimes not so good, is almost beside the point. It's you and he against the establishment, you and he against the Russians, you and he against the welfare cheats, you and he against Congress (well, he's got a point there), you and he against promiscuity, you and he against impatient, ungrateful subscribers.

You and he on exotic, arguably tax-deductible investment seminar tours. You and he assuring his next book, Making Money, climbs onto the best-seller list, thereby confirming his popularity and expertise. ("Buy the book sometime in the two weeks beginning May 14," he offered 175,000 subscribers, and your newsletter subscription will be extended at no charge.)

The investment letters I do like don't attempt to predict world events, the price of gold or even the course of the stock market, but provide the kind of fundamental analysis on overlooked or undervalued situations I don't have time to do. And even then I don't have a great deal of confidence in them, because picking undervalued stocks is a tough, tough game. Most people will be better off picking a seasoned mutual fund that picks undervalued stocks, like Mutual Shares Corporation.

Generally, when asked where to look for sound investment ideas, I suggest a subscription to Forbes. But that's no good because no one expects to get rich fast reading Forbes. We want to believe there's a simple, worry-free way to make 1,555% on our money.

And I don't blame us.

more books by Andrew Tobias