Note: See Reply from the ?Australian Stock Report? for ASR’s reply to this article.
In our previous article, Stock tip-sheets?influential or manipulative?, we warned of the manipulative nature of some of the stock tip-sheets. Today, we will particularly name a company for their questionable ethics.
Yesterday, a sale representative of the Australian Stock Report (ASR) called us to sell us their tip-sheet?he was the most aggressive salesman we had ever seen. By the end of the phone conversation, he was badgering us and was almost shouting. Finally, we had no choice but to hung up on him. The first question he asked was how much our return was. We gave him an arbitrary figure. Then he proceeded to tell us that if there was a way that we can get a return of 50% (which was higher than the arbitrary figure that we gave him), would we be interested in his product?
That sounded tempting. But that salesman insinuated that only an idiot would refuse to subscribe to such a too-good-to-be-true product such as ASR. We pointed out to him that such alleged returns would not be a guaranteed result. Bound by the Australian securities regulation, he was forced to admit that there was no such thing as a guaranteed return.
When we baulked at such a steep price of ASR?s tip-sheet, the salesman promptly cut the price from $1490 to $650 and threw in a bonus free month of subscription?an instant cut of 60% on a per-month basis! If you look up their web-site, you can see that the official price of the Daily Report package was $1490. Isn?t it interesting that we can get an instant 60% ?discount? just by being sceptical of their product? What about those people who paid the ?full? price of $1490?
We then asked him about ASR?s analysis methodology. He told us that ASR used both fundamental and technical analysis and that their analysts had a combined x number of years of experience, devoted a combined x number of hours of research for each stock and so on. Along the way, he told us that ASR took the reports and recommendations from the large and famous brokerage houses (e.g. UBS, Credit Suisse) as input and from there, out came a stock tip-sheet product that includes daily SMS and email alerts as well as direct access to their analysts everyday. Did he mean that ASR relied on analysis from those large brokerage houses to derive their recommendations? If so, than that means such ?analysis? of theirs was derived secondary analysis from the large and famous brokerage houses? primary analysis. Therefore, this sort of ?analysis? is just another child?s play?just collect a bunch of primary analysis, rephrase and combine them in your own words, throw in some of your own ideas and out come another ?analysis!? This is easy?we confessed that we had done it ourselves before since there is rarely such a thing as a truly original idea. Most ideas are derivations and combinations from previous ideas. The extent of un-adulteration to which one?s ideas are derived from others? shows the extent of emptiness of one?s ideas. This is something that you may want to check out on for ASR?s reports.
Next, the salesman claimed that ASR relied on both fundamental and technical analysis. But take a look at their trade list, which showed their buy and sell tips along with the theoretical returns. There is no denying that they were recommending short-term trades. Such activity is highly uncharacteristic of long-term value contrarian investors with the same philosophy as Warren Buffett. Therefore, to classify ASR as a tool for investors is highly misleading?they are more suitable for short-term traders.
Then we asked him about the length of their track record. He told me they had 4 years of track record. That was our main point of contention. In the world of investments, 4 years of track record is nothing. For the past 4 years, there was a raging bull market. We are more impressed with Warren Buffett, who had been investing since 1960s and had consistently surpassed the index benchmark most of the time in all sorts of market conditions. Australia?s famed Platinum Asset Management had at around 16 years of consistent track record. These investors have real financial assets to back up their claims. For ASR, they had nothing to back up their claims except for theoretical returns that relied on numerous flawed assumptions (more on that below). Other investment newsletters like The Intelligent Investor include a hypothetical portfolio that you can verify and invest according to if you want to.
In any case, that salesman was trying to argue with us regarding the issue of track records, even resorting to patronising our personal investing history and experience. He even tried to question whether we could even find anything with such long track records that we were looking for. His failure in recognising others in the industry that had much longer history than ASR showed his complete lack of professionalism. It was laughable to hear of his assertion that Warren Buffett?s 30-year investment history was ?proof? of obsoleteness and that ASR was always up to date. Clearly, that salesman was ignorant, given that he completely failed to understand the point of track record. With such failure of comprehension, he rattled off with other irrelevant assertions that we were not interested in. In exasperation, we had to tell him off that we could not care less of his irrelevant points. Indeed, if we use ASR?s method of measuring returns, their record for 2007 was atrocious (see their trade list)?they lost money in 7 out of 9 trades with an average return of negative 5 percent!
Next, ASR?s measurements of returns (as shown on their trade list) were highly dishonest. Take a look at their trade on SRK on December 2006. They recommended a buy in December 2006 and a sell in April 2007. But guess when they designate their ?profit?? If you look carefully at their figures, the ?profit? was assigned in December 2006 when the theoretical sale of the stocks was in April 2007. That ?profit? was then added to the cumulative value of their portfolio in December 2006! Subsequent trades were then based on this flawed cumulative value, thereby artificially inflating their alleged returns. This is so far just an example of a shenanigan that we have caught.
As we said before in Stock tip-sheets?influential or manipulative?, ASR, with such a large subscriber base, their ?recommendations? would be likely to become self-fulfilling. Furthermore, if their job consisted of monitoring broker reports from the large and famous broking houses, recommending a buy recommendation the moment brokers upgraded their recommendations was hardly ingenious. In that case, the amount of your profit will depend on how quickly you react their SMS/email alerts, fighting your way to the market before the rest of their subscribers.
ASR?s employment of extremely aggressive sales tactics should put a big red flag on their level of integrity. As this article in the mainstream news media said,
ASR could not provide a definitive response on its performance methodology and its website advertises an astonishing, though presumably selective, 408 per cent return on its “CFD Traders” product.