Hulbert Financial's Bottom 10 Newsletters

by: Tim Iacono

Every year at around this time, the folks at the Hulbert Financial Digest publish their list of the ten best and ten worst newsletters of the hundred or so that they cover as part of a service that meticulously tracks newsletter investment performance.

Peter Brimelow files this report at MarketWatch where, not surprisingly, some of 2008's best performers are now included in the list of 2009's worst and some of the most heavily promoted offerings continue to enrich their authors, if not their subscribers.

How are the mighty fallen, or at least bouncing. As usual, this year's bottom 10 performing investment letters include names from last year's winners. Maybe there's a reason.

Arch Crawford's Crawford Perspectives (down 7.2% according to the Hulbert Financial Digest compared to a gain of 27.10% for the dividend-reinvested Wilshire 5000 Total Stock Market Index), was the top performing letter in 2008. ( See Jan. 9 column.) It's famous for its astrology perspective, something that few Wall Streeters will admit to sharing, although it's actually not that uncommon.

Whatever. Crawford lost money this year -- not a lot, and it's really only 11th from the bottom, but I felt like including it. Crawford has had a checkered -- but by no means catastrophic -- career, and the letter probably should be credited with its strong medium-term record, up 6.95% annualized over three years against negative 5.73% annualized for the total return Wilshire 5000.

Hey, whatever works. A seven percent annualized gain over the last three years is something that many newsletter writers (and investors) would surely be happy about.

In a corollary to last year's stellar performance by those who shorted stocks, this year's top performers are no doubt perma-bulls in high-risk, high-return sectors, that group likely to be announced in a day or two with at least a few +80 percent results to follow up last year's -80 percent tally.

Those who remained bearish in 2009 had a rough go of it and there are some well known names in that list - Fabian, Schaeffer, and Eliades to name three.

I'm afraid I can't find much exculpatory to say about another of the top 10 letters last year, Doug Fabian's ETF Trader. ( See Dec. 17, 2008, column.) Fabian is down 49.2% in 2009 to date. This matches a record of negative 14.65% annualized over the last 10 years compared to 0.2% for the total return Wilshire 5000.

But there must be a reason it stays in business. Surely?

Fabian is the heir to a great name -- his father was Dick Fabian, brilliant advocate of a simple moving-average system. ( See Aug. 2, 2004, column.) Doug Fabian's own letters have been ruthlessly promoted. ( See Mark Hulbert's Sept. 6, 2006, column.)

Even more puzzling is the survival of letters like Donald Rowe's Carnegie Management Group (down 19.42% over 10 years) or Bernie Schaeffer's Option Advisor (down 12.17% over 10 years). But both are long-established names in the industry.

If there's one thing that, sadly, I've learned in four years of writing a weekly newsletter for the companion investment website Iacono Research, it is that promotion and marketing are much more important than the performance of the newsletter's investments - at least when it comes to actually running a business of writing a newsletter.

You can write the world's worst investment advice but, properly marketed and promoted, you can make a bundle of money from paying subscribers. My guess is that all ten of these fared well in 2009, especially those who were in the top ten last year.

  1. Crawford Perspectives -7.2%
  2. Investment Models Newsletter -9.4%
  3. Almanac Investor Newsletter -12.1%
  4. Sy Harding's Street Smart Report -12.5%
  5. Peter Eliades Stock Market Cycles -12.5%
  6. Coolcat Total Stock Market Report -19.1%
  7. Nasdaq Wizard Mid-Term Model -20.1%
  8. Carnegie Management Group -24.4%
  9. Nasdaq Wizard Long-Term Model -30.7%
  10. Bernie Schaeffer's Option Advisor -33.09%
  11. Doug Fabian's ETF Trader -49.2%

It looks like the model portfolio at Iacono Research will close out the year with a gain of somewhere between 15 and 20 percent, this following gains of 25.4 percent in 2006, 23.9 percent in 2007, and a loss of 27.4 percent last year for an annualized return of just over 7 percent in these four years.