Suze Orman’s bad investment newsletter

By Felix Salmon
January 22, 2012
Jason Zweig has managed to get one of the weirdest quotes ever from a would-be investment guru:

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Jason Zweig has managed to get one of the weirdest quotes ever from a would-be investment guru:

In a news release issued in March 2007, Mr. Grimaldi said one of his newsletters had “been ranked #1 by Hulbert Financial Digest” for the five years through 2006… Mr. Grimaldi’s other newsletters, although not the Money Navigator, have featured the claim “Ranked #1 & Recommended by Hulbert Financial Digest!”

Mark Hulbert, editor of the digest, says his publication “doesn’t make recommendations” and that “no matter how I slice and dice the data, I cannot support [Mr. Grimaldi's] claim of being No. 1 for that five-year period.” According to Mr. Hulbert, Mr. Grimaldi’s highest rank from the digest over that period was 25th out of 110.

Mr. Grimaldi says he ranked No. 1 over that period: “I’ll say that to my grave.”

Memo to Mark Grimaldi: whether or not you were ranked and/or recommended by Mark Hulbert is not a matter of belief, it’s a matter of fact. And Hulbert is on the record saying very clearly that he did neither. If you say that he ranked and/or recommended you, to your grave or in any other context, you are lying.

Which brings me to Grimaldi’s strongest defender:

Ms. Orman declined to address specific questions about the newsletter or Mr. Grimaldi’s background. “Mark Grimaldi is my trusted partner in The Money Navigator,” she said in an emailed statement. “He is ethical, honest and achieves stellar results that consistently outperform the market. I’m proud to be able to provide our newsletter to people who are looking for solid financial advice.”

Lying about being ranked by Hulbert Financial Digest is, needless to say, neither ethical nor honest. Which means, on an unsympathetic reading of Suze Orman, that she’s lying too.

When I spoke to Orman last week, she made it very clear that her relationship with Grimaldi’s newsletter was no different than her relationship with the Approved Card — she’s an owner of both of them, thinks that both of them are very good products, and is proud of them both. (The same goes for her FICO package, too.)

Orman also told me twice that the newsletter was rated number one — she was adamant about that. And now it turns out that it isn’t. I spoke to Orman on Tuesday; maybe Zweig hadn’t contacted her with his questions yet at that point. But at best Orman is extremely incurious about the “fabulous” newsletter that she is so keen to hawk and defend. And at worst she’s happy lying about it being ranked highly by Hulbert.

And that’s not the end of the Grimaldi/Orman sins, either. Check out this table — which is still up on Grimaldi’s website:

old.tiff

It shows that the S&P 500 rose by 19.79% in 2009. Which, as Zweig points out, isn’t true: the S&P 500 actually rose by 26.46% that year. And that’s no isolated mistake, either:

In nine of the 10 years cited, the newsletter understated the performance of the S&P 500. “I’m not perfect,” Mr. Grimaldi says. “We don’t claim to be.”

Getting the performance of the S&P 500 right isn’t something only perfect people do — it’s a basic prerequisite for anybody claiming to beat the index, and it’s pretty easy to find. And given that Grimaldi can’t get the performance of the index right, I have no faith whatsoever in the numbers he’s putting forward for the performance of his portfolios — numbers which are very hard, if not impossible, to check.

This week, the newsletter carried a note saying that the 2009 performance return was a “typographical error”. And indeed the same table on Suze Orman’s site has been fixed:

new.tiff

The 2009 figure has been corrected to the right number. But 2004, 2005, 2007, 2008 and 2010 are still too low, while 2006 is too high — 2009 is the only year which is exactly right!

Here’s something else which is weird: check out the total return for the S&P 500 in each of the two tables. While the 2009 return has gone up, the value of a $100,000 investment on 1/1/2001 has gone down! Only by a little bit, of course. But it’s hard to see what calculation could possibly have resulted in that small decrease.

Meanwhile, as Mick Weinstein points out, the portfolio recommended by Grimaldi’s newsletter prominently features Grimaldi’s own Sector Rotation Fund — and Grimaldi’s Sector Rotation Fund is the kind of thing that no sensible long-term investor should touch with a bargepole. When Weinstein wrote his post, the single largest holding of the Sector Rotation Fund was the ProShares Ultra S&P 500 leveraged ETF — and, if you look today, it’s still the top holding.

But levered ETFs, as we all know, are short-term investments, which to a first approximation should never be held for a period of longer than one day. They have no place at all in a long-term retirement fund. And the fact that Grimaldi is investing in a leveraged ETF at all is all the information any investor — including Suze Orman — needs to steer well clear of him.

Orman and Grimaldi defended their newsletter, both to Zweig and to me, by saying that it doesn’t really cost $63 per year: Orman is always out there with offer codes allowing you to get a trial issue for free, without even handing over your credit card information. But a free newsletter is no good at all if it gives bad advice — and any newsletter which thinks you should buy Grimaldi’s Sector Rotation Fund as part of a long-term retirement strategy — or at all, really — is giving bad advice.

I’m disappointed in Orman for telling her readers that they can beat the market. I’m disappointed in Orman for implying to readers that if they spend $63 per year on her newsletter, then they are likely to beat the market. And I’m extremely disappointed in Orman for getting into bed with Grimaldi in particular, who charges a management fee of 1.65% for investing in his Sector Rotation Fund, despite the fact that all he’s doing is buying ETFs.

And of course all of this rubs off onto Orman’s other products, too: the tar of the Money Navigator newsletter is going to wind up getting brushed onto the Approved Card, whether it deserves it or not. Which is yet another reason why we need a new personal-finance guru — someone who can replace Orman and judge her products impartially.

Comments
14 comments so far

Why is it that Hulbert needs to “slice and dice the data”? It should be straightforward to confirm or disprove the statement. Find a person who has a copy of March 2007 Hulbert digest, and check the five-year rankings.

Posted by Nameless | Report as abusive

Why do you believe Orman is interested in anything beyond self-promotion?

Posted by TFF | Report as abusive

From the many shows I’ve heard, her advice is generally very good, and no doubt she’s helped a lot of people. But she’s always been a self-promoter. That’s not necessarily a bad thing, and kind of tautological for someone that “made it” as a celebrity – even a financial one. Lately though it seems her self-promotion has taken the front seat, and her role of looking out for main street has been banished to the the back seat, as she apparently seeks to cash out big time on her brand.

Posted by MarkInSF | Report as abusive

It should be clear by now that Suzie Orman is following Donald Trump and monetizing her name. I can’t honestly understand what other people saw in her, at least Dave Ramsey would advise people to get out of debt and “beater cars” instead of financing for those with monetary constraints. It’s not about how much credit you have, but how much you’ve saved!

Posted by Sechel | Report as abusive

please continue to expose this crap, Felix. well done.

Posted by KidDynamite | Report as abusive

Reminds me of ads that say “Recently Voted Best…” with no explanation. Yeah, I imagine that the owner took a one person poll. And they were the only person in the room.

Posted by ComradeAnon | Report as abusive

Ditto. Well done. Finally, some real journalism in this country. Keep exposing these frauds.

Posted by buyLower | Report as abusive

What TFF said. Suze Orman seems like she isn’t satisfied with the considerable wealth she’s been able to amass for herself dispensing personal finance advice, being a television commentator, etc. and has moved almost completely into the business of being a huckster. Being a personal finance guru is now just a way of collecting credibility so as to increase the market potential of her various “branded” products and services.

Some folks just have no shame.

Posted by Strych09 | Report as abusive

NICE! Checking the numbers of TV hucksters and financial newsletter hawksters. I’ve long gone on the supposition that they’re all bogus, of course, but nice to see someone doing the math for once.

Posted by Eericsonjr | Report as abusive

Great job Felix… this post is a real public service!

Posted by y2kurtus | Report as abusive

Worst “I am about to launch a personal finance guru website” post – EVER! ;)
Good work as ever Felix. Thanks for this.

Posted by TinyTim1 | Report as abusive

Years ago when I read that Suze Orman had most of her own funds in muni funds while giving tons of financial advise to do otherwise in most of her ‘sermons’ I took note. She is not credible in the least, while in her travels selling her ‘advise’, her books, whatever anyone will buy to make her more money. She is a bad joke as far as financial advise goes. Excellent piece, Felix…..

Posted by Dug.59 | Report as abusive

If you think Suze needs more fuel for her
private jet then by all means purchase her products and watch her on TV. The advice offered, with that saccarine smirk and lame “girlfriend” greeting, is very basic. Ask yourself this, did she protect you from the real estate flop? get in early on gold? locate a stock that would triple? well of course not..but she did tell you to shop around for car insurance…quick where is my wallet!

Posted by scotto80 | Report as abusive

“she did tell you to shop around for car insurance”

…a product that can’t (or shouldn’t) be selected strictly on price. Try filing a claim with the wrong insurer and your headache will be three times the check that they grudgingly cut you a month later.

Posted by TFF | Report as abusive
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