Pilot Money Guys:
What's Up With Investment Newsletters?
Flight #19: Investment Newsletters – Investment Advice or Entertainment?
“There’s a lot of money to be made from financial newsletters that give investment advice. But the money comes from selling the newsletters, not from taking the advice.” ~Paul Merriman
Investment newsletters are getting more popular every year and the returns they promote are extremely tempting. So, should you ditch your financial plan and subscribe?
We’re diving into newsletters to give you our honest opinion and concerns.
Unfortunately, anyone can create an investing newsletter, and because they are not actually managing your investment accounts, they have no regulatory agency monitoring their recommendations or investment performance accuracy.
Investment newsletters only fall under the 1st amendment right of free speech, so they can claim any returns over any time period regardless of actual performance.
From the article “The Truth About Financial Newletters” by Paul Merriman.
“In a 35th anniversary edition of The Hulbert Financial Digest, publisher Mark Hulbert noted that when he began tracking newsletters in 1980, there were 28 of them. Of those 28, only nine have survived. The rest are gone.
Of the nine newsletters for which he has continuous data back to mid-1980, only two have beaten the market (measured by the Wilshire 5000 Index) on a risk-adjusted basis. One newsletter has matched the market for 30 years, and the other six have lagged behind.”
voice actorr: ladies and gentlemen, welcome aboard the pilot money guys podcast, where our mission is to help clients build and protect wealth to achieve their dreams and goals. This podcast is brought to you by leading edge financial. Without further ado here is your host. Robert Eklund.
rob: Here we go. Investment newsletters, flight 19 folks, a tip of the cap to you.
Thank you for joining us here at flight 19, the pilot money guys podcast, where we cover some airline news and of course, a financial topic we aim to educate and bring some light hearted, financial fun to your day. I'm your host wealth manager, Rob Eckland, AK rubber mallet, the flight crew today. Is the godfather certified financial planner and former F 16 fighter pilot, Charlie Mattingly godfather.
charlie: Thank you, Mellon. Great introduction.
rob: You're welcome. Flying in the number three tail and Charlie position is Mr. Kyle Bell, the Ben Dickinson. Welcome Cabo. Oh, I can barely hear it.
Ben: Clear that up
rob: in editing
Ben: post production.
rob: I didn't bring that biz as an a biz in the best. That's super dope. This is a good one. Guys. We got investment newsletters. This is going to be fun. A lot of fun. That's
charlie: right. Robin, you sound like you're feeling better, which I'm really excited
rob: about. I'm not a hundred percent, but I'm getting a 99.9.
charlie: you just need to calm down just a little bit. You're getting way too excited.
rob: You shut your mouth when you're talking to me, Cal belt. Kalba all right. Still nothing been. Aviation news. We're going to do a little obstacles the way on this one as I messed up and I'm going to apologize.
I can't believe it happened, but I know first time ever don't tell my wife quick correction. On the previous podcast, I called the T 38 and F four. I don't know what I was thinking. It was a slip of the tongue. Forgive me the F five. Of course, which was the Russian MIG and top gun. Yeah. Yeah, many apologies.
So we're going to use as our aviation news because we're going to tie it into what's replacing the . Which show a picture. Ben, can you
charlie: me pull that up? I got it pulled up. Oh, there it is.
Ben: There you go. Wow. That
charlie: was your music.
rob: All of you listeners out there. We've got the bowing SOP slash sob. It's an American Swedish speeding.
Eklund is Swedish T seven red Hawk. That's going to be set to be delivered or it's set to be delivered in 2023 to replace the teeth RDA. That's a good looking trainer and
charlie: is nice. Look at this one right here. Why do you need, oh yeah, that's nice. Wow.
rob: Yeah, that's beautiful. I want to go back. Northrup.
Talon was a two seater. It was the world's first supersonic. And is also the most produced it's pretty cool, but it's going to be retired in 2023 or there abouts it began production, or at least it started the development. The development started in 1952. So it's about time to be replaced. I think Charlie, when he got through that, I
charlie: did, I flew that airplane.
It was a fun. Pretty cool airplane. First airplane to go supersonic. And you went on a designated ride for your supersonic rod. That was so cool. Boom. Yeah, it was pretty cool. I'll never forget. One of my best memories was your first formation night flights as a student. You're on the wing. It's at night, you're sitting on the runway, they push the power up and all of a sudden you see a big.
To your left or right. Whatever now. And you're just, I was so stunned. Like I got left behind on the takeoff.
rob: I forgot.
charlie: I forgot to pull them and push my throttles forward. I was like, this is so awesome. What are you doing?
I was singing and I would like, look at, look in the mirror and do this little look here, like in the.
rob: What was your call sign? I should have asked you that. What was your calls? I,
charlie: it was Woody,
rob: Woody. Oh from the animated. Yeah. Probably
charlie: something like that. Something, yeah. Toy story.
charlie: Nice. I think that was what I got when I was in the F 16, before that it was like, we have a couple different ones as you go through training. One of them was a. Which I think means dumb cow in Spanish. If I'm not, if I'm not mistaken, dumb cat,
I don't know. My Spanish is not very good, but that's what they said. It's not my dumb cow. That was me. And then
rob: smart cow would have been way better.
charlie: I don't think I fit that role. Ever though that was appropriate. Where'd
Ben: you fly or did you fly over. So you get on that flight. Where were you flying over on that flight?
charlie: The supersonic training, the training somewhere over Mississippi, those lakes to the north of Mississippi. What do they call the point set? I can't remember. Welcome up.
rob: Hey, Ben used flashed right before you put the up there. You flash something about the. It was hell yeah.
Ben: Oh yeah. So this is the new doge coin. It's the, basically this is also a joke crypto coin that was making fun of doge coin, which those coin is a joke coin made up of making fun of Bitcoin. But Sheba, let me tell you. Just pass doge coin and it's doing great. I think it's because Elon Musk got a Shiba Inu, I guess it's a breed of dog.
And let me tell you this thing is doing great. It's got a market cap of 40.7 billion value, which is with a B, which is just wild. I don't even know this is a little scary. I don't even know if I should share the year to date returns, but I'll put it on here on YouTube. Check that one out.
rob: It's a little scary.
I dare say, Dr. Evil's the person who came up with Sheba. I
charlie: think he
Ben: might be right. It's doing great. I bought some today just so I can talk about it on this podcast. And let me tell you, let me see, let's see how we're doing here. Got about a hundred dollars worth I'm down.
charlie: Dang here's the kicker, Ben like you and I talked and I said, okay, I'm in, I'm going in 96000000% return.
Yeah, I'm in and I'll put a dollar or two and become a gazillionaire, but how do I get my money back? That's what I want to know. Yeah. Yeah. I don't think there's a trick. That's the trickery, huh? Yeah.
Ben: Yeah. Just selling $96 million worth of your Sheba. I don't think it's, first of all, it can crash the market, I would imagine.
And then, so this
charlie: is real, it's not real yet. To me, in other words, I can't get my money back. Like you said somebody, and this is I'm being a little bit serious right now because everybody's Hey, I'm going to put 10 bucks a piece in all these. And I read, I think I read today, there's 10,000 different cryptocurrencies now is that we'll look at that in a minute.
I've gotten to see the seam Taylor the mask pronouncing that, it seemed to leave tele whatever. We'll re reference him in a minute, but really smart dude. That's the point? And so if I want to put my money in these things, I want to put 10 bucks a piece in each one and it goes up 96000000% in a year.
I can't really get that back. I got to go to some kind of, nah, that's the catch?
Ben: Here, I'll share this. This is this is. Some people are saying here, there was this NFT that was sold for $532 million. I think they realized it was actually dished up. They says it's a flash loan. I'm not exactly sure how that works, but, or people I was reading about this and what people were saying was the guy couldn't get his money out of.
He put money into cryptocurrency is obviously a very rich person. They, he wasn't able to get it out. So he's converting it to all these different crypto based assets to just try and get his money out. And I don't know. We'll see. I don't think you can get your money out if you put it in.
charlie: Oh yeah.
So that's the catch right there. So this is a fake world of something weird going on that I can't explain yet. And not many people can either, but back to the article NASEM to leap tailoring. I keep, no, that's not him. That's the writer of this article.
Ben: Okay. Okay. Got
charlie: you. Got you. So this guy has written books And Ben, would you Google which books he's written?
I cannot escape my mind right now. He's a prolific writer. In fact, reading his books is a challenge because it is dense Swan, black Swan, all the ones he's
the same, not very
charlie: different. So here you go. You got to pull it up on, on the article that we read today. And it's pretty interesting. And Bitcoin, I'll just read a couple of the highlights here. Bitcoin has failed to become a currency because Bitcoin transactions are too expensive and too slow. I didn't know that this article says that if you go to buy a cup of coffee with Bitcoin, it can take 10 minutes.
If it were a currency, it's not a currency now. But I didn't know. I didn't know. It was like that. I thought the whole point was that it was a fast or instantaneous or whatever, is it inflation, hedge? What happened in 2020? Did it protect anybody during the market downturn of 2020?
This article says no. Yeah. And here's the interesting thing. And it's towards the number seven, eight or nine, one of the goals with these cryptocurrencies is to get rid of the intermediary and that's number nine. Bitcoin does not solve the agency problem of reliance on intermittent inter intermediaries.
Sorry. So that's one of the solutions that people say, Hey, we need this decentralized. Money. Yeah. The problem is he says is every time you have in history or whatever, when you have an effort to get rid of intermediaries, the disruptors become the new intermediaries. In this case, it would be the people mining the coin.
So the miners themselves, if they knew that all of a sudden this became the one, the thing now they're the new intermediate. So I'm going to get it from the miners. Yeah. So that was an interesting thing that I didn't think about. And I'm not sure either, and this is me, not in the same, not sure either that the decentralization is really what we want in our money, even though we, a lot of times we don't one entity, either government in our case doing things it's one of the more trusted.
I know that's I know that's laughable. Sometimes I expected you all to laugh when I said trusted, but thank you. All the PR is the fed or the government, whoever we do need some entity that somewhat trustworthy besides. Bitcoin miners in their basement,
Some sketchy folks
charlie: at the top. I call the top a couple of weeks ago. I don't know if I'm still right or not, but yeah.
Ben: Oh no. I think you're doing great. I think you're doing great. And just a, something on Coinbase and all of these different marketplaces where you can go and buy the Bitcoin. We were mean the professor, we're just talking to somebody who was involved in the Mt.
Gox got money, all his money stolen back in the Mount gospel gosh, crisis that we've talked about in the last podcast. We think Coinbase is going to survive. We think that they're doing the right things, but we don't know. We don't know what, like Jim and I that's another big one.
We don't know if they're going to actually end up being able to allow. Not to mention the problems with going on with the stable coins that are, it's just awful. I think tether is big issue right now, but
rob: anyway, I'd like the scroll up just a tad bit there where it says he aims a mini gun, where's it say?
Ben: gun that Bitcoin
rob: has underlying database technology, blockchain. Yeah, he's a smart guy, again, not the guy picture, but
Ben: again, and black SWAT is a great movie to
rob: check it out. Let us know what you think. All right. Charlie, what do you got on any other aviation? I know that wasn't aviation, but
charlie: we couldn't resist that one.
The other aviation stuff we talked about was just the interest in, the new pilot hiring. It's just been insane to see. Get rid of, airlines get rid of pilots. I E me and then, and and lots of others. And now they're just desperate for POTUS again which is totally crazy, but it's, that's the reality that we live in.
So what are these programs? A lot of our clients, kids, a lot of people are saying, my kid wants to fly. What, how do we do this? What's the best way to do it. And almost every airline. I know I looked into United. I looked into Southwest, maybe a no, I think Delta has one too. Southwest is called destination 2 25 pathways.
So what what are these things? Basically, you go to some training out in Arizona for Southwest, and it's part of a, they have a partnership with CAE and you do a flights and simulators. Then you go work for four years somewhere. But if you do all that, go through the programs, then you have a chance to become a Southwest pilot or United or a Delta pilot, depending on which program you go through.
So there's some that are like college, where you go to school, you get a degree, you then become a pilot or you skip the college stuff all together and then just go straight into the flying program. If you get accepted, there's no flying experience required, but I think the program for a year or so, it could be, I'm not mistaken, 80 to a hundred thousand.
So the other thing that we looked up for one of our clients was can I use my five to nine, we checked into that, tried to dig a little bit. I don't have a definitive answer. My guests at this point would be know that you cannot use five to nines for some of these destination 2 25 programs.
And it basically has to be an eligible education institution in the eyes of the IRS. And and in fact, on the website there, especially for Southwest or specifically for Southwest, I should say it says you must demonstrate the ability to pay out of pocket. Or secure financing for the total amount of the program.
So in fact, then they start to advertise Southwest federal credit union, blah, blah, blah. So let's say IRS website, here's the IRS website language, an eligible educational institution is a school offering higher education beyond high school. It is any college university trade school or other post-secondary education institution eligible to participate in a student aid program.
Run by the U S department of education. So according to this irs.gov program can w can, you can use your five to nines for that program, if it's an eligible educational institution, which means they accept students. So that's from the irs.gov website there. So check the interesting.
rob: Wow, very interesting.
So I just
charlie: want to share that real quick, because we have a lot of people thinking and talking about, Hey, my kid's interested in flying. They're hiring again. There's a pilot shortage. So hopefully
rob: that's. Yeah, it is. I think that's a useful to a lot of listeners out there. There's a lot of good stuff we're covering on this podcast has that moved newsletters, but let's get into it before that though.
Why is money important to you? Do you need help with retirement planning, college savings, tax loss, harvesting state planning. Let us know as fiduciaries we stand ready to help. We can manage your investments and provide comprehensive planning continuously or on an hourly basis. Give us a jingle at 8 6 5 2 4 0 2 2 9 2.
Or check us email@example.com.
charlie: All right. Nice work. Hey, you know what, Rob, the best part of that, you got the voice, you got the phone number, right? This time.
rob: Nailed it. I've
charlie: had to edit out the phone number, every other timing now.
rob: So if you ever called us,
charlie: if you notice a previous podcast where Rob says and give us a call. Thank you very much. And I don't know how to insert the right number into our oh,
rob: nice job. My bad somebody to your actions. Two times I've been wrong.
charlie: does not listen to know
Ben: your rights.
rob: Okay. Investment newsletters. We're going to cover newsletters, intent, the legal standard they owe to you and their performance. First things first newsletter the intent. Are they for entertainment purposes? Are they fiduciaries? Charlie? What do you got on the man's letters?
charlie: I'm going to start talking now and I'll be done in about 25 minutes.
So just want to clarify newsletters. We're talking specifically about investing newsletters. There's a lot out there. In fact, we say we have a newsletter, our newsletter, not our newsletter. Our newsletter is truly the best. Yeah, but the newsletters we're talking about today are the ones that say, buy this, sell that, buy this, sell that you're going to do.
Awesome. And there's a bunch of them out there. So
rob: Like stock picking or mutual fund.
charlie: Exactly. Yeah. There's tons of them out there and I've used some paid for some before and some of them are very interesting, but that's what we're talking about today. The intent is to help you to invest your money.
Is that a good answer? Everything.
rob: Well, is it their intent? Sometimes? I think you're right. I think other times they're, they're not a financial, they're not associated with any kind of the, of controlling entities, such as the sec or a state or anything like that. They're only governing. And we'll get, I guess we'll get into this into the legal standard, but I might as well cover it.
Now. They're only governed by the first amendment. They don't have to report that what they actually did to anyone. And matter of fact, if it weren't for some, just a nice folks out there tracking them, no one would know what they actually do. So I think their intent is mainly for entertainment purposes.
A lot of times. And you have to be really careful what you're getting into. There's a lot of money they're making off of you. So you say, oh, they're just a hundred bucks a year. No big deal. Multiply that by a thousand, 10,000 people, obviously that's the money. So I think it's mainly entertainment for frugal people thinking, and this is going to be harsh, but I'm going there anyways, entertainment for frugal people.
They think they can beat the system by paying a hundred or even a thousand bucks. To a newsletter that they think is out there trying to do the best they can. And so they intent is there really a publishing company for entertainment purposes, and I'll even read one of their disclosure. I'm not going to say the name of it, but Blanc is a publishing company.
Period. Blank is not a financial advisor, nor is it a financial. So that's kinda my 2 cents on the intent, the they've done studies. We're going to get into mark Holbert. Who's the godfather not to steal your name, but the godfather, the king of a newsletter analysis. Who started it, he's been examined him since 1980.
And they've from his research. They've distilled that even though the newsletters are written and produced by really smart folks that went to Harvard or whatever, and have all these different degrees behind their name or letters behind their name. They actually didn't do any better than newsletters produced by Joe Schmoe down the street.
So anyways, that's what I got. Ben, what do you got?
There are many different types out there I've even seen some for the crypto have been out there now they'll even give you the what to buy, what when to sell. There's some, I know there's a really popular one about options trading.
There's some about that. And it's just kind of these groups of people that think they know when to time, how to time the market. And as we all know, there's you gotta be right when you're trying to time the market on two things. The buy and sell. So you may be right on the first side, but when are you going to sell when am I going to sell my Sheba?
I don't know. I'm waiting for a newsletter to come out to tell me, but but yeah, the intent behind it is I guess it's just a, it's just to make themselves seem really smart and get some clicks
rob: and pulled us. We have a conflict of interest, obviously, because if you're about a newsletter, you probably not.
Part of a leading edge financial planning. So that we're going to say that up front, we have a conflict of interest. Doesn't mean we're wrong
charlie: right, I'm gonna, I'm gonna disagree and I'm gonna get angry. And the reason is because yesterday I was in Nashville taking my daughter to we just went to the concert.
We visited Vanderbilt and in the hotel, I met this guy and this girl, and they were there to be on the Maury Povich. What? And so they were Maury Povich stars. And he was offering to buy my daughter some snacks, and he's Hey, we're here on NBC's card. So his job was to be on Maury Povich and and be the drama guy.
And he was a coach. He said he wanted to be a coach to teach people how to be more dramatic and angry on their show. So I'm trying to take the tips that he taught me.
All of that's a hundred percent true, except I'm not very good at being emotional and getting angry. But let me just, I'll just tell you this. Did you have a question about the more he puppet show
Ben: Ben? Yeah, I was just going to say, was it about like you are not the father is that
charlie: He said we do a really good job of showing our emotions.
So we come back on the show multiple times. Oh,
Ben: wow. Wow. What a career? I
charlie: love that. He said he makes 50. If he was to be a coach, to coach other people to be on the show. 1500 a week. So that's not bad, not a bad coaching gig. Just tell somebody to get angry and start shouting about that. Baby's not my daddy, the baby daddy.
Anyway, sorry. We really got an off track, but the point of all that is I will tell you this, there are some newsletters that have done really well over a long period of time. Okay. However, so have some mutual friends. So have stocks, so have some bonds, no, not bonds disregard that part mutual fund, any other holdings.
So here's the challenge. And this is what mark Holbert does. Like you mentioned, Rob, he, he ranks all these newsletters over time one year, three year, five years, 15 years. So you can go look at some of these newsletter. And go, how well have they done over 15 years time period. W what time period is appropriate?
I don't know. What's a good sampling size point is there's some pretty good performers out there, but how do we pick the ones? And if I did pick the right one, would it be a good performer in three years and five years in 10 years? Would it be the same one? It's the same process with investing there's mutual funds out there. You can go Google the top 15, 20 mutual funds of all time. And they do just as well, if not better than the best mutual, excuse me, newsletters of all time. So it's interesting that they can produce documentation. Some of them that say we've done this performance for 15 years, but Rob, back to what you alluded to, they are absolutely not advisors.
They're not regulated. Like we are a registered investment advisor. Regular regulated by the securities and exchange commission. So when we tell our client, this is your performance, that number has gone through some rigor, Moreau. That's a scientific word for there's a lot to that. You can't just tell somebody, here's your performance, which is what the newsletters do.
And they compare it. For example, there's one newsletter that caters to our pilots they'll compare their performance to the S and P without. Dividends make up 20, 30, sometimes 40% of the actual return, depending on the dividends that year. So I could tell you, in essence, that I'm beating the S and P 500 without dividends and not tell you I'm comparing to something that's.
And that's not something you can actually invest in. Does that make sense? Yeah, absolutely. That's where newsletters get tricky is because sometimes they're good, but how do you pick the ones that are going to be good in the future? Just like picking an investment. That's going to be good in the future.
You don't, you can't.
Ben: Yep at Charlie Holbert. He was doing, we were in this article where he's got since 1980, he's been tracking these newsletters and 28 of them, I think, is in the article. He's been able to attract since 1980 of those only nine are still around today and out of all of 28, just in general, only two have actually beaten them.
Only two. So just like you said, yeah. W what are the, are you going to be able to pick those two newsletters out of the 28 that were then, and then stick with the program, then not missing email. What if you missed a newsletter? Oh, There it goes, you're tracking. Yeah, you're right.
You're not gonna be sticking to it. That's
rob: exactly what happens. This kind of, this is a great segue into the legal standard owed. When we talk about anything, when it comes to money, I think it's important to peel back the layers and peel back the onion a little bit here. The layers of the onion. Is that a proper term?
The onions of the layer? Yeah, the London. I'm eating an onion anyways. There's a lot of layers in an onion. Okay.
When we peel it back and we start looking at who can start a newsletter, like who can be in a financial advisor, you have to pass a test in a series 65. And not that makes you the end all be all by any means. But I think it's important to look at some of those basics and some of the background there.
So who can start a newsletter and investment newsletter. Anyone?
charlie: Anyone? Yes. So I'm going to start a new, oh, sorry. Ben.
Ben: No, I was just gonna say it reminds me of this gambling show that I watched a few times about sports gambling and they have their track, their picks. Who's doing the best, who's doing the worst.
They also have a goldfish that whichever side it swims to that picks the winner. And it almost, it's just as good as anybody else. It's just like that in the, in these newsletters, just get a goldfish or
charlie: pick it for. Yeah, no that's been done in the world of investing to where there's a, I can't remember.
I wish I could remember the story, but same thing. So I'm going to start a newsletter, you all, and here's how I'm going to do it. You ready? I'm going to design a strategy that has beaten everything in the last year. I'm going to, I'm going to do something. I'm going to do it right now and go, Hey, what would have beaten that in the last.
I'm going to put that out on my newsletter and then I'm going to put four or five other newsletters out that are maybe a little different just in case things are different, going forward. And then one of those five is going to do really well. And that's the one that's going to survive for the next five years.
And then I'll design. So go on mark. Holbert I think I'm pronouncing his name correctly. Yeah, you are. Look at the newsletters for each newsletter. He pulls up there's about five or six of them that are very similar in name and come from the same company. So it's not difficult to design a newsletter that is going to be successful.
And then you can tout those returns going forward. The other thing I'm going to do is I'm going to design something that did great in one year and that year of 2000. So that actually happened. In fact, this is a mark Halbert's article in the Barron's newsletter, September 9th, 2009. He says, how should you pick a newsletter?
And remember, this is September 9th, 2009. I went through a pretty helacious one of the worst besides the great depression recessions we've ever had. So you look back, he said, what if I look back at the last 12 months and I get the best performing newsletter of the last 12 months and pick that one, that's a pretty good, right?
That'll build you some credibility. If you can kick butt during the worst recession we've ever had. But the catch is those newsletters, underperform. Every other time in the. So they were only successful during one year.
rob: And I think that's so important. And the point you made there, Charlie, we hammer this a lot, but it's worth it.
A foot stomping again, past performance does not guarantee future results. When we talk about money managers, there's been tons of studies out there. Here's one that comes to that we've got in the show notes. We'll put it in the show notes. The study that was done on this one shows the top money managers in the top core tile, the top 25%, the NICU of the last three years, they fell out.
70% of that top. Cortel fell out of the top core tile at the top 25 over the next three years. So if you're picking somebody because they did well the last three years, there's a 70% chance they're going to fall out of that top 25%. So even if you found. There you're going to, the chances of picking someone like that's going to continue to be a top performer is very slim.
So I think when you're talking money managers, newsletters, it's all in the same vein there, right? Yeah.
charlie: So people say, Hey, you're bagging on these newsletters. They're terrible. You guys are awesome. Of course, so what is the answer? The answer is. Is that no one, no investor should only focus on investing.
Now that sounds weird. Investing is very important, but there are many other things that, that I think an investor needs to focus on that I believe the newsletter distracts you from. In other words, if I sign up for a newsletter. Then I get some sense of control, some sense of I'm doing the right things.
When in reality, you're really not doing anything differently than owning, maybe aggressive mutual funds. For example, these airline newsletters, they give you a recommendation and they require you to say or pick, are you aggressive? Are you conservative? Are you monitor? So pick one of those. Okay. You pick aggressive and then boom.
And I used to I used to, I signed up for this newsletter. I evaluated it, looked at it or whatever, because I wanted to know what people were doing and how they did it. So you just pick the mutual funds that are equity, the stock mutual funds. If you're aggressive, that's what you get. If you're conservative, guess what?
You don't pick the equity mutual funds. You pick the, you pick like maybe 30% equity mutual funds and the rest bond. So you're conservative. So what if I just picked the aggressive mutual funds. You just did just as well as any newsletter.
Does that make sense? In other words, I'm having to choose, am I aggressive? Am I conservative? Am I moderate? That's the most important thing to try to understand and know, and the newsletter can not do that for you. You have to make that selection. If you're all following there, I'm probably not explaining that wherever
rob: I'm going to use a, their own verbiage again here, while we're talking about this and it's the publisher does not analyze the suitability of any particular fund or investment approach for individual investors nor makes specific recommendations tailored for individual investors.
There you go. Yeah. These portfolios have significant risk and are for sophisticated investors willing and able to assume a high degree of. And then the next part's nice to any and all communications from blank incorporated. The employees should not be construed as personal advice on investment. So any communication from employees should not be construed as personal advice on investments.
Although our employees may answer your general customer service questions, they are not licensed under security laws to address your particular investment situation. So I think that's very important that they are not governed by. The sec and they do not have a fiduciary standard or best interest standard.
They don't even have a suitable standard. They are just protected by the first minutes, meaning they can claim almost anything. So some of the best pitches are fantastic. I like this lock in 400% returns. Lock-in 400% returns or this one's actually my favorite to turn $10,000 into more than 40.
charlie: Wow. She's
rob: 847% annualized returns over the past three years. And then wow. Blank newsletter delivers information. You can't get anywhere else. Nowhere, that almost sounds like insider trading, which is. But I like how they
charlie: say, I like how they say this is for sophisticated investors. It's what's sophisticated about that.
You know what I mean? That's
rob: That's not do exactly what you tell
charlie: me. Yeah. So the, I'm trying to, you did a great job, Rob, of trying to articulate or help me articulate what I'm trying to say, but I'm trying to say that what. What if I say, I want to be conservative in a time, and then I miss out on the next 10 years worth of returns because I decided I should be conservative.
That's just, that's my point is what does that mean? And how do I pick that? And that's the most important thing. Here's another disclosure from one of the newsletters that, that caters to the airline pilots. He says, we're not gurus. There's no crystal ball. We don't know where the market is going, but we can tell you what are the best performing funds,
a money magazine article done in 2014 about. About these newsletters, because the newsletters were directing people to sell mutual funds. Our airline people to sell mutual funds in their 401k is in Vanguard T Rowe price.
There may have been another one. They put restrictions on it because they said, we, we do not want this mass Exodus of funds of money from our mutual funds because we. Execute our mutual fund strategy within that mutual fund. There's two, you gotta have too much liquidity for a mutual fund to execute.
So they said no more of that. They cut them off. And it was, they were basically doing these massive trades because of the newsletter. So the newsletter, why is the newsletter so appealing? And it was this article did a really good job of interviewing some people. I was one of them. They didn't quote me in it, but anyway,
so one of the persons they interviewed, I thought nailed it. She said all I had before this newsletter was a single index fund, but I always felt like I could do better. I was missing out. I feel like I have more control. And after the say the same is talking about American airlines bankruptcy the 25 year vet said she needed that sense of stability more than ever. So it's fascinating how, again, we've, and I can understand that you feel like you want to have some sense of control. And, that's a behavioral finance thing and here's the, here is the man, the legend William Bernstein.
He's awesome. He's a doctor and he's a private pilot, by the way. He says investing as with flying, our instincts can be wrong. Warren's William Bernstein, the neurologist turned investment guru, who also has a. When a pilot comes in for a landing while flying slowly and descending rapidly, the instinct is to pull the nose up, but you actually need to point it to the ground to get enough airspeed to fly.
Again, investing is the same way. We instinctively react to danger with fight or flight, which is useful, which is a useful instinct in nature, but all the wrong and finance, you should not sell. When the fund goes down, you should hold on. And I'll add, buy more of that. I want to buy more when it's down but nonetheless.
It's really a fascinating how it becomes a behavioral issue. You want to get some kind of control and I can do that for 90, 95, 99 a year in the newsletter when there really is. It's just a facade. Sorry to interrupt. I'm
rob: done. It ties right in to mark Colbert's analysis. And one of the most distinct patterns, I guess they notice.
From his analysis and the newsletter monitoring was the inverse correlation between markets and the consensus and the opinions of the newsletters. They were monitored. So they tended to be bullish at, or near the top of the market and bearish at, or near the bottom of the market, which is just super fun, like opposite of what you want.
And these guys that said, I don't think we. Say this enough or we can't do it justice, but these guys are so good. These newsletters, and a lot of them are so good at a copyright and convincing you, they know what they're talking about. And some of them are great, absolutely phenomenal speakers. And they go, they're asked to speak at all these financial conferences and at the end of the conference, everyone's going up and asking them, oh, how do you do this?
And I'm going to get in and meaning. I won't name names, but I guess when he's been down here, he does an option newsletter and he's been down 20% a year for the last 15 years, at least when that study was done. And I don't think it's up to date 20, 21, but down 20% a year, you start off with a million dollars.
You're not going to have very much after a 20% loss every year. And when you talk about, I think it's important to talk about option newsletters, which I guess there's quite a few out there. They have a terrible track record and they sell you on the this notion of, Hey, we're going to we're you're not going to participate in the downside of the market.
And unfortunately, that's exactly what you end up doing is losing a lot of money. A lot of downside.
Ben: And maybe we talk just really quick about some of the alternatives to this newsletter, a tactic of investing, because we're really comparing this to the markets and what you could get in the market.
And, not only is there the stress involved in the likelihood that you're going to probably lose money by following these newsletter based on a lot of the studies you could just get a very healthy return if you're just invested diversely across different asset classes in the markets and you get what you get the returns of the market you invest through time and and it's much, much less stressful than trying to keep up with the next the next big hit investment and, hoping you buy and sell it at the right time.
rob: Yeah, I think that's important to BIM because a lot of these newsletters, you have to do it when they're saying, if you're to capture the gains they're talking about, and if you miss that, say you're flying that day and you don't get to it, you can miss out on whatever theory they're trying to implement.
charlie: Perfect. Rather you nailed out what I was getting ready to add on to Ben's comment is, those things are really, you got to make this trade now because it's based off of this moment. Momentum in there, these moving averages and whatever, of course it's proprietary the technique that they use very proprietary that they can tell you, but it is momentum. Based on the prices, most recent prices, that's what that person was alluding to. And we know the prices today and that there's some information in that. However,, here's a couple alternatives bend to the question that you raised, which is excellent.
What else should I do? , I would rather personally do a target date fund if I was going to do, if I was looking for something, , I think planning is the way to go.
I think there's ton of value in planning and knowing should I be risky? Should I. Aggressive, should I be conservative? You know that, that's the key question. That's the most important question like we've talked about before, even with the target dates, maybe I've got a military pension maybe maybe I can handle more, be more aggressive, maybe.
But the point is there are other alternatives been that in, that's a great
rob: question. And I just, I have to throw in because there's a lot of scholarly debate on you made it sound. Charlie will throw you under the bus. The momentum is something you can count. And there's a lot of scholarly debate that you can not do that efficiently.
But I just wanted to foot stomp that there's a lot of people say you can't do that in momentum. And also that's if your newsletter is actually, prescribing to that theory and trying to do that some newsletters, or I guess there was one back in the day that literally said they were.
Their investment advice from God and that's who they were getting thing. Yeah. I know. Turned out not to be true, but yeah, I'll say they can claim anything. Yeah,
charlie: just you're right though, just to be more specific about the momentum factor sometimes that's what it's called is dimensional fund advisors will say that we cannot capture.
That re that that factor, we can't get that premium because it costs too much to just wrap up in a mutual fund. In other words, dedicated an entire fund to that because of the expenses, it negates the benefit of the momentum factor BlackRock, or I shares does have an ETF. They tend to put stuff out there where if somebody wants it, they put it out there.
That's just, how they're different than dimensional. So you're right. It is definitely very debatable on how to capture that, that
Ben: And it just, and the other thing about these new letter, I know we've said it, but these people are not registered in any way, shape or form. They don't actually manage people's money.
They're not allowed to, or I'll say they wouldn't be able to do these newsletters and say these Garren teas, when you could invest in an active ETF, actively traded mutual fund, that's held, that's run by manager, a fund manager that has all the certifications that is regularly. And, they probably have a lot more knowledge than the the newsletter people, but just
rob: another alternative.
That's a good point. But, and I think we've thrown a lot of numbers out, but one that I think is easy for people to, to realize is you have a one in seven chance of picking the newsletter that will outperform the. So you do the math on that one, you got a one in seven chance of outperforming the market, or there's the opinion.
You just try to be the market as best you can or factor investing or whatever. But yeah. Mr. Jaffe from the Wharton school of business and James Mahoney from the federal reserve bank of New York, they came out with a study a while back that concluded, taken as a whole, the securities that newsletters recommend do not outperform.
Appropriate benchmarks, period. That's and that was the quote directly from it.
Ben: know. Might drop right there. Yeah.
rob: I love it. I know we got more on this, Charlie, what else you got?
charlie: I think it's a behavioral thing.
I really do. I think it's like that quote earlier, we feel a little bit out of control. We want to have some control. We want to do something. We want to feel like we've earned that passive income. There's some science behind that. In fact, Dan O'Reilly one of our favorite behavioral finance economic professor out of duke says sometimes when feeling out of control, we reach for a narrative that will help us we don't like randomness. He adds, we try to force order on life around us. So we tell ourselves a story. And that story is that I subscribed to this newsletter. I'm going to do better when in fact, you can do okay.
It's just that like you can do okay. With a lot of other things too, such as a target date fund or buying the most aggressive funds in your 401k. But anyway,
rob: I'm done. You can't. Yeah, you can do. Okay. But I think it's so interesting that those, the publishers of these newsletters, they only, again, you only hear about their wins and they are geniuses at hiding their losses and only, research like Holbert is able to point out their losses.
Yeah. All right. I think that's it. You guys got any fun, man that went
charlie: by fast. I think our training from the Maury Povich show paid off,
rob: can we get an emotional adviser?
charlie: That was intense drama.
rob: I was hoping we were going to come up with our own news. During that whole thing, actually
charlie: talk about it.
That's a good point. Ours is boring.
rob: Yeah, but we can name it something good. One of the kind first in class retire next year.
charlie: Best ever guaranteed.
Ben: Lots of guarantees in our newsletters.
rob: Lots just done. All right. That's it a couple of quotes to leave you with from Charlie. Here you go. You don't make money when you buy and you don't make money. When you sell you make money. When you wait.
charlie: Boom, Charlotte.
Ben: He always knows what to
rob: say. Second one, those who keep learning will keep rising in life.
All right. That's it. We've arrived at our final destination. Let us be the first to welcome you to the end of flight 19. Thank you for joining us here at the PA money guys podcast. If you have any questions or would like us to answer any, anything you have about the show, shoot me an email.
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So plan according. From all of us to here at leading edge, this is October 29th. So we're going to say happy Halloween. You're not going to hear this until afterwards, but happy Halloween
charlie: at the hut
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