Stock and trading site disclaimers

I understand why stock and trading sites like TheStreet.com and other free and subscription-based websites have disclaimers that tell you that all the information on the site is purely the author's opinion and should not be taken as investment advice, nor should past predictions be relied upon for future returns, but it is then disingenuous for them to tout their results and solicit visits/subscriptions on that basis.

 

Specifically, regarding past and future returns, the disclaimer is a result of regulatory requirement. If a stock index gained in every of the 8 years over the last 8, would you think going log the index is risk-free? So, you shouldn't think it's risk-free regarding advice which is or isn't "investment" advice.

 

I am not talking about risk-free returns, but sites that say that if you had followed my picks on X date you would have earned Y return, and therefore you should follow me because I am such a great stock picker. Contra, the regulatory disclaimer specifically disavows any results, good or bad, and that the site is not responsible for any of your investment decisions.

Then on what basis is the site able to attract subscribers if whatever predictions are made have no investor value?

 

The bottom line is every trader or investor should use their own judgement. This is the only way.

For the sake of example, imagine a aspiring trading guru starts 2048 (2x2x2... 12 times) investment web-sites. Web-sites are cheap. So, it's much smaller an investment than other small investments you can think of.

Every month the aspiring guru posts a long-short portfolio on one half of his sites and a reverse portfolio on the other half. After each months he terminates any web-sites that produced a negative return.

At the end of a year, he has a web-site that produced a massive positive return in each of the previous 12 months... without actually possessing any expertise whatsoever. Then the aspiring trading guru advertises this one of the 2048 web-sites.

 

Allow me to awaken you up. Many of those who subscribe to those sites do the opposite exactly and make money.

 

This is an interesting point. Assuming stock picking web-sites attrack large following (whether the web-sites are free or paid for), whenever they generate a stock pick which is otherwise unfounded in the market, there will be a reversal after most of the web-site followerrs have bought in.

 

Yeah I get all those emails from them with the teasers of how well their picks did. So I finally emailed them back asking for details of their full trading record, like what % of their picks gained a minimum of X amount in Y time frame and what was the max drawdown, avg drawdown, etc. They replied that they didn't have access to that information. Hmmm...they sure seemed to have access to exactly how their top performers performed, from entry to exit.

Pristine is a legitimate entity if you want to follow someone else's recommendations. They'll provide their track record, they're accessible, their strategies are sound and time-tested. They have some free stuff you can sign up for. I get their Stock Play of the Week (swing trade setup with entry price, stop loss, and profit targets) and it's been rock solid for the many months I've been getting it. And there's no fudging, because they call it all in advance.

 

In recent years the SEC and CFTC have come under repeated attacks for not prosecuting or shutting down fraudulent trading and investor web sites or excessive spam on a timely basis. For example with spam the SEC did this for “Operation Spamalot” to stop pump and dump spam :

http://www.nytimes.com/2007/03/09/business/09pump.html?_r=1

My understanding is that websites that are making impressive touted results are much more difficult for the SEC and CFTS to shutdown if their disclaimers are in order. The reason this is true is that these disclaimers state what they are touting is “…educational materials..” and not actual trades. Thus what a trader or investor is buying is a “…educational experience…” on how trading and investing may be done.

Of the two I believe the CFTC has taken a stricter view of what can be touted. I have heard of more prosecutions by the CFTC than the SEC in recent years.