By Jason Zweig | 1:49 pm ET Jan. 25, 2012
Last weekend’s Intelligent Investor column focused on some contradictory details of financial disclosure in the Money Navigator, an investment newsletter co-owned by personal-finance guru Suze Orman and money manager Mark Grimaldi.
When I asked Grimaldi last Thursday for the source of the table of annual returns for the “S&P 500 Benchmark” in the newsletter, he overnighted to me a sheet from Value Line showing annual total returns from 2001 onward.
However, none of those returns matched the ones in the table in the newsletter.
Next, late on Monday, Grimaldi forwarded a second Value Line sheet, this one covering not the Standard & Poor’s 500-stock index but the Vanguard 500 Index Fund (VFINX).
None of those returns matched the ones in the table in the newsletter, either. While several of the numbers were identical, the Value Line sheet listed them for different years.
Shortly afterward, Grimaldi forwarded yet a third sheet from Value Line, showing returns for the Vanguard 500 Index Fund. This time, almost all the numbers matched.
After telling me on Thursday that he used the S&P 500 index (not an index fund) as his benchmark, Grimaldi told me in an email on Monday that “My publisher has always used VFINX as the benchmark as clearly stated in the newsletter.”
I couldn’t find any such disclosure – you can try finding it yourself here – and when I asked Grimaldi to point out where in the newsletter it is “clearly stated,” he didn’t reply.
Earlier, Grimaldi had insisted that his newsletters were awarded a No. 1 ranking from Hulbert Financial Digest (HFD). As proof, he sent me a press release he issued in 2007. After Mark Hulbert, editor of HFD, informed me that none of Grimaldi’s newsletters had gotten a No. 1 Hulbert ranking for that time period, Grimaldi sent me a spreadsheet that purported to prove his claim. (HFD is owned by MarketWatch, a subsidiary of Dow Jones, which publishes The Wall Street Journal; MarketWatch owns several newsletters that may compete with the Money Navigator.)
“The 2007 press release was based on the attached data,” said Grimaldi’s email. “The top two newsletters [in the spreadsheet] are my Navigator newsletters. All data was retrieved from the Jan 2007 Hulbert Financial Digest.”
There are three problems here, says Mark Hulbert.
- First, Hulbert awards the rankings; newsletters aren’t free to re-sort Hulbert’s data any way they wish and then declare that it proves them to be No. 1.
- Second, Hulbert Financial Digest has never awarded a No. 1 ranking to any newsletter using the “overall” rating that Grimaldi relied on. “The alternative ranking methodology Mr. Grimaldi is proposing is not one I agree with,” Hulbert told me, “and it is not the basis of rankings in Hulbert Financial Digest.” Because the “overall” figure compares the returns of the same newsletters across differing time periods, it generates results that aren’t statistically meaningful, says Hulbert. “It’s comparing apples to oranges,” he adds.
- Third, Grimaldi’s spreadsheet is incomplete, says Hulbert. It doesn’t include three newsletters that, according to Hulbert, ranked higher if you use Grimaldi’s methodology:
Newsletter name/ Overall risk-adjusted return
The Successful Investor: 0.3703
Mutual Funds Magazine (stock seasonality timing system): 0.2724
The Buyback Letter: 0.2518
Grimaldi’s Fidelity Navigator and No-Load Navigator newsletter scored 0.2505 and 0.2455, respectively, according to Mr. Hulbert. Thus, they ranked fourth and fifth, not Nos. 1 and 2 as Grimaldi asserted.
I asked Grimaldi again this week to explain these discrepancies, and he didn’t respond. Orman, too, has apparently been saying that the newsletters were ranked No. 1. A spokeswoman for Orman declined to comment on whether Orman has repeated the No. 1 claims.
Earlier, Grimaldi had said that he would insist on the validity of his No. 1 ranking “to my grave.”
On Tuesday, in a statement emailed by Orman’s spokeswoman, Grimaldi said: “I appreciate that you have pointed out the errors in my reporting of several S&P 500 figures. While there are no questions about my models’ returns, I take this very seriously, and have immediately rectified those errors. I sincerely apologize to you and to my readers for my errors and will be redoubling my efforts to provide my readers with accurate and useful information as we move forward.”
“There can be no substitute for accuracy,” Orman said in a statement to the Journal on Tuesday. “It’s important to me and it’s important to readers of The Money Navigator. I appreciate that Mark will be much more careful in his reporting of S&P 500 figures in his tables moving forward. I continue to be a big fan of Mark’s financial advice.”
However, neither Grimaldi nor Orman addressed whether his claims to be ranked No. 1 by Hulbert were accurate.
According to Hulbert, no one from Orman’s organization has ever contacted HFD to verify Grimaldi’s claim of a No. 1 ranking.
What due diligence did Orman perform before entering into a business partnership with Grimaldi? Orman’s spokeswoman declined to comment.
As of last Friday, the voicemail greeting on Grimaldi’s cellphone was still instructing callers to hold for a brief message from Suze Orman. A voice sounding like that of the personal-finance guru then announced, “Mark Grimaldi is a genius!”
Source: WSJ.com, Total Return blog