Here is what I received from IRI in response to my questions:
Q:"Another question for you - I was recently reading the June 2 issue of Forbes, and Mark Hulbert in his _Wall St. Irregular_ column says that the overall performance (since 1983) of _The Option Advisor_ is an annual -2.2%... this concerns me since _The Option Advisor_ is the newsletter to which I am thinking about subscribing."
A: Mr. Hulbert figures are inaccurate. Hulbert failes to mention and explain SOME VERY IMPORTANT facts about his methodology to the Forbes reader. He chooses to omit such information and sheds our newsletter in the worst possible light. For example, here are several aspects of his methodology that we feel are questionable:
*He tracks the newsletter at a 3% commission rate which is unacceptable relative the the .75% rate he sets for stock newsletters.
*He needs to update his 1988 survey of commission rates to take into account the downtrend in discount and deep discount commissions in recent years.
*He needs to develop another method of tracking option newsletter performance over the years, as its full compounding method doesn't match other money management guidelines among major option newsletter publishers *He calculates performance numbers under a veil of secrecy, which should be verified by an independent agency like a Big 6 accounting firm, since he refuses to share his database calculations with publishers. (he doesn't explain HOW he calculates the performance numbers to anyone).
*Finally, his ultimate motives are in question due to a conflict of interest between his own newsletter and the ones he rates. He stands to gain by panning the value of the other newsletters; consider the media exposure and profits (from selling his "watch dog" newsletter) he receives by publicly slamming other newsletters.
Q:"Do you have a year-by-year breakdown of the performance of the picks in the Option Advisor? Sending out a list of 100% profit (or better) picks is helpful, but doesn't give much insight as to how many of his picks *lost* money..."
A: This list was not meant to be perceived as if we were hiding the losing trades. I had been getting many emails from people saying, "You're good in the long run/last year/etc., but 'what have you done lately'". I pulled together all of the winning trades and realized that made for much too long email messages; so I cut everything that was less than 100% wins and it is still an impressive quantity of doubles+.
As to the Option Advisor performance breakdown, I am pretty much assigned to work on the real-time services (which is where all of those wins came from). You will want to call Kathy Dakin in our office- she takes care of Option Advisor questions. I do know that our 1990-1997 overall compounded return for the Option Advisor is +108.5% and working at a 1% commission rate, it would still be +53.5%. To compare, the overall performance for the real-time services was an average gain of +98.4% for 1996 alone. If you will call, we can discuss the different ones and I can send you track records showing their performance (winning and losing trades).
Mike's note: The commission rate will eat you alive if you don't have the $$ to invest in many contracts. For example, if I buy 5 contracts @ $2 each - I spend $1000 plus $30 on commissions - that's 3% vs the 1% that they're talking about.
Since you are thinking of joining one of Bernies services, you might want to call me and discuss these before you make a final decision. Many people think that the services are priced based on ease-of-use and thus, the Option Advisor is the entry-level product. However, the real-time services are designed to be much simpler to use for several reasons:
1) they tend to focus on a single trade on a given day vs. 10 trades per months in the OA.
2)they are in a format where you can virtually read them to your broker
3)they alert you when to get in and when to exit in real time vs. working with you through the mail and using the call in hotline on the OA.
This is not arguing that the OA is not a good product; we have 25,000 subscribers. There are just different things for different people and not everyone thinks the OA is our easiest-to-use service. Many people like the simplicity and real-time nature of the other services. |
