To Double Your Investment Results, Call This Number...

Back in 1995, Warren Buffett told a group of graduate students in Chapel Hill, North Carolina, about his ill-fated investment in USAir.

Buffett bought a preferred stock issue from USAir in 1989. By 1995, the company had piled up losses of $3 billion, and Buffett's preferred dividend was suspended. He finally cut his losses the following year. It was possibly the worst mistake he's ever made.

Buffett joked to the graduate students that there ought to be a hotline for people who are tempted to invest in the airline industry. Whenever he felt tempted to buy shares of an airline company, he'd just call the hotline number and someone would "talk him down."

Buffett's hotline number would be 1-800-AIR-LINE.

Mine would be 1-800-PRE-DICT.

That's PRE-DICT, as in a preoccupation with predicting market direction, interest rates, oil prices, and other macroeconomic movements. It's the Achilles heel of many stock investors.

Believe me, I know whereof I speak...

First, there was the first real cash I ever put into something other than a savings account. I put $2,000 of cold, hard cash into several different commodity futures contracts because I was sure that certain interest-rate moves were going to have an inflationary effect.

I exited about six months later, with $268 remaining in my account.

Hope triumphed over experience, and I was at it again in no time. In the mid-1990s, I predicted higher gold prices, bought a gold-stock mutual fund, and doubled my money in less than a year.

In 2000, I predicted higher coal prices, and my readers doubled their money when I picked Consol Energy, the big eastern coal company.

These two successes are the worst thing that could have happened to me. I took them as proof of my ability to forecast trends. Confirmation bias, they call it. Big mistake.

Then I predicted that electricity prices would soar, taking shares of Calpine higher. Turns out I picked something very near the all-time high in that stock. It’s in bankruptcy now.

A few years later, I predicted electric-utility stocks would rebound after Enron decimated the industry, only to watch them fall twice as far as they already had. The effect on me and my readers would have been less dramatic, had I not recommended more than 20 of them!!

A couple years ago, I predicted a bull market in catastrophe reinsurance premiums. In that particular case, I was dead on... except that I picked PXRE Group, one of the companies that got crushed in the post-Hurricane Katrina crisis. The other companies I picked all did well. Too bad I recommended selling all of them way too soon.

After that reinsurance thing, I went cold turkey. No more macro predictions. From now on, it's just individual stocks, each one judged on its own merits.

In his 2005 fourth-quarter shareholder letter, Marty Whitman said, "Whatever I predict for the next five years, I'm sure it's going to be wrong. We're long-term buy-and-hold investors. We don't buy or sell based on near-term outlooks or cyclical problems."

Peter Lynch says he's fully invested at the bottom and fully invested at the top. He doesn't care a bit about the market, in other words. Another wealthy investor I know personally once looked out at an investment conference audience and said, "I've got two balls, and neither one is crystal."

In his landmark biography, Buffett, author Roger Lowenstein notes that a consistent source of failure for Buffett was investments he made as inflation hedges.

The message is clear: Forget the macro stuff. Forget predicting where interest rates will be. Or where the stock market will be. Or who's going to win the next election. Or what the price of oil will be.

Time and experience (and failure!) have made the point to me. Ignore the daily deluge of news about the stock market, interest rates, oil prices, presidential elections, the January effect, and all the other things you can't control, and I bet you'll make a lot more money in stocks.

Stock investing is about picking stocks, and holding on long enough to let your money compound effectively, that's all it's about.