December 21, 2011, Mark Hulbert Said: "Honor Pays" But is the "Honor Roll" Honorable?

December 21, 2011...........................................................(comments welcome)

On Moneytalk last Sunday, Bob Brinker bragged about Marketimer newsletter being on the Hulbert Financial Digest "Honor Roll," and he advertises it on his website.  Are Bob Brinker and Mark Hulbert acting honorably, or is it all about the money? I report, you decide.

Once a year, Mark Hulbert creates a list of newsletter writers and calls it an  "Honor Roll."  However, these "Honor Roll" choices are based on Hulbert's own subjective criteria and have very little to do with actual performance of the newsletters.

One of Hulbert's criteria is his own created "categories" of up and down stock market periods. In the December 2011 issue of Hulbert Financial Digest titled "Honor Pays," Hulbert wrote:

 "Of the nine letters on last year’s Honor Roll, just six made it on to this year’s. It’s not that the remaining three did anything terrible over the last 12 months to cause them to come off this list. They continue to have excellent long-term returns. They instead were victims in part of my re-categorizing the last dozen years into different “up” and “down” periods, which I did in order to recognize the market’s decline that began this past spring as a separate “down” period."

 Hulbert doesn't base his "Honor Roll" on overall performance. Matter of fact, he clearly states that some of the best performing newsletters don't fit into his  subjective "criteria."  In the December issue, Hulbert continues:

 "Of the nine letters on last year’s Honor Roll, just six made it on to this year’s. It’s not that the remaining three did anything terrible over the last 12 months to cause them to come off this list. They continue to have excellent long-term returns. They instead were victims in part of my re-categorizing the last dozen years into different “up” and “down” periods, which I did in order to recognize the market’s decline that began this past spring as a separate “down” period."

 Hulbert further explains his criteria and says that many letters with as good or better returns don't make the list:

"The Hulbert Financial Digest’s Newsletter Honor Roll is loosely modeled on Forbes’ Mutual Fund Survey. However, the Newsletter Honor Roll that appears in this issue is entirely the work of the HFD and is not endorsed by, or in any way affiliated with, Forbes magazine."

"HFD has performance data extending back to August 31, 1998 (the beginning date for being eligible for this year’s Honor Roll). On those pages, you’ll find no fewer than 22 additional services whose overall returns are just as good, or better, than those that did make the Honor Roll—but which nevertheless did not meet the criteria for making it onto the Honor Roll."

Hulbert also explains that he uses arbitrary "up and down" market periods to grade newsletters for his Honor Roll.  Hulbert says the letters he grades have a "heavy US equity focus."  And importantly, he says if a newsletter has more than one portfolio, he uses an average of them. Bob Brinker's Marketimer has three portfolios, one of which is about 50% bonds  which over Hulbert's time span have done better than stocks.

How interesting that Bob Brinker has to rely on the Honor Roll portion of HFD to promote his own newsletter. Perhaps because he cannot use his HFD overall performance ranking. Here's why:  In the time frame nearest Hulbert's Honor roll criteria (ten years), Marketimer doesn't make it on the list. I dug a little deeper and found that Marketimer is number 20 in that time frame.  December 2011 Hulbert Financial Digest:

So in spite of Marketimer's lagging performance, Brinker always seems to make it on to  Hulbert's "Honor Roll" which he then uses for advertising Marketimer.  And on the other hand, Mark Hulbert uses Bob Brinker's Marketimer presence on the Honor Roll in his "for sale"  writings and newsletters.   Some examples: In addition to Hulbert Financial Digest, there are these examples of Hulbert writing about Bob Brinker for Barrons  and Marketwatch  "Hulbert on Markets"

And it doesn't end there. Take a look at this ridiculously slanted  Barron's article written about Mark Hulbert writing about Bob Brinker.

To sum it all up, this December 19, 2011 Forbes article tells it like it is. The author says "Thank Goodness for Index Funds" and compares Bernie Madoff type of fraud with bad investment advice, such as Bob Brinker's, as ways to lose money. Rick Ferri wrote:

"Finally, index investors were saved from countless terrible market calls made by so-called experts. Here is a sample of bad advice that torpedoed the savings of many people:

• Who can forget this famous book published in early 2000? Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market, was published by James K. Glassman and Kevin A. Hassett at the very peak of the market bubble. It was a period when people were mortgaging their homes to get into the stock market.

• Bob Brinker couldn’t have been more off the mark with his market prediction in late 2007.  “The short-term correction that began in October and continued into November has served as a health-restoring pullback and has paved the way for new record highs in the S&P 500 index.” The S&P 500 collapsed 37 percent in 2008.

Read more at Forbes: "Thank Goodness for Index Funds" by Rick Ferri (Please note that this Forbes article sources  Kirk Lindstrom, and my blog.) 

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