Sunday, September 16, 2007

Stock Market Newsletters - Written By Hucksters Or Are Some Really Worth The Price?

My honest opinion is that none are worth the price, and some are indeed hucksters. Think about this with the advent of the Internet, absolutely anybody can publish an investment letter. The cost to publish it is tiny if you can put up your own website and send your own email one subscriber and youre in the black! No one regulates or oversees such folks all they do is publish their opinions through the Internet, and you pay perhaps $150 a year for the privilege of getting their emails. There are no guarantees that they are the smartest guys in the room, and who knows what kind of research they actually do (Look, I do a BLOG on my website, and thats effectively the same as doing a newsletter. The difference is that Im just not charging you anything to see it).

One of the big dangers is that many newsletter writers have monetary ties to the companies they recommend, which you do not hear about. This leads to serious conflicts of interest, and there is virtually no means to find out about it.

For whatever reason (I think because 1. Its the fad, and 2) Its easier) most stock investment letter writers today are chartists of one flavor or another. Well, as the one of the last of the Mohicans when it comes to believing that fundamental forces move the market, let me tell you a big secret among stock commentary letter writers: All the forms of chart reading, from Elliot wave charting to whatever flavor you choose, are simply and purely horse manure. There is simply no scientific support for them. Like palm reading, tarot cards and astrology, chart reading is highly subjective and open to the interpretation of the reader. One need only look to an assortment of Elliot wave experts and see that one looks at the chart of a certain stock and sees it will be heading upward in the future, while another views the same chart and foresees the stock heading downward. Most chart interpretation is based on patterns of squiggles in the chart lines, but how a chart appears is heavily dependent on the parameters of how you draw it. Seeing various head and shoulder or cup and saucer patterns are very much like Rorschach inkblot tests you project your thoughts and feelings onto the meaningless inkblot. Making decisions based on chart squiggles - Yikes!

The prices of stocks and commodities yoyo up and down with a general long-term trend in an upward direction, and it always has been so. Just because a stock or commodity price moves up for a week doesn't mean it will move upward for the next three months. Just because a stock or commodity price moves down for a week doesn't mean it will move downward ward for the next three months. In the same way, just because it was warm in New York for a week in January, it doesnt mean winter is forever banished. Just because we have a couple bad hurricane seasons back to back doesnt not mean all such seasons will be bad from now on (Just ask the morons that used to work at Amaranth - and the poor fools who had their money invested there). What a short memory we all seem to have!

So the next time your letter writer says Its the end of the world! The markets are going down to nothing Just wait and dont get too excited. It wont be long until another letter writer will proclaim Its a moon shot, the markets are going through the roof straight to the moon! Dont get too excited over that either....... The market goes down and everyone gets worried the market will implode. But after a few weeks of solid gains, the worry dries up and the market get overbought. What happened to all that worry?

Theres going to be loads of fast steep drops and sharp jumps in the stock markets, gold and silver from here on out, you can bet on it. These shakeouts are necessary to get weak players out of the market.

I think anyone who studies the fundamental facts and charts can do as well as some over paid letter writer. Most well paid stock market letter writers do not out perform the market, nor do they out perform the stock picks of monkeys armed with darts. I highly doubt those who track commodities or currencies do any better. There are studies done concerning the Hedge Fund operators, the most over paid by market advisors far, showing that they also, do not, as a whole, outperform the market. So why do some folks pay good money for newsletters, mutual fund managers and Hedge fund operators when scientific study shows they are no better in the long run than market indexes? I dont know there is simply no rational reason.

Personally, I think you might as well flush your cash down a toilet as invest in newsletters. You'd be much better off to just buy some gold or silver with the money. Or even better yet, grab a pen, develop a talent for writing BS, and then start your own newsletter, charge other people money and invest the cash you make in stocks or precious metals.

If you feel you just must read some of these newsletters to get ideas there are a number of free sites on the Internet like my BLOG. In addition, a good number of investment letter writers do still publish a printed version of their work, and many libraries still subscribe and you may be able to view them at your local library. There are plenty of free sources to get ideas.

Chris is an independent investor and his market comments can be viewed at:

Chris BLOG on investing in gold, silver, and stocks can be found at:

Chris Ralph writes on small scale mining and prospecting for the ICMJ Mining Journal. He is an independent investor and writes on that topic as well. He has a degree in Mining Engineering from the Mackay School of Mines in Reno, and has worked for precious metal mining companies conducting both surface and underground operations. After working in the mining industry, he has continued his interest in mining as an individual prospector. He can be reached at P.O. Box 3104 Reno, Nevada 89505. His information page on prospecting for gold can be viewed at: