Corruption in the Newsletter Industry?

Mar 15, 2024
Corruption in the Newsletter Industry?

What Goes On Behind the Scenes in Newsletters?

You’ve talked briefly about your past experiences at Brownstone Research/Legacy Research. Most of the big names who worked there are now gone. (Mostly due to supposed “corruption.”) I think your experience in the newsletter industry could give us consumers a good look into what really goes on. Could you talk to us about corruption in the newsletter industry? I’ve been a lifetime subscriber to Palm Beach Research and have seen some shady actions over the last couple years. I’ve been a day trader for 8 years, so I’ve come to know manipulative action in markets when I see it. I think all of your readers deserve insight and an explanation of what really goes on behind the scenes.Joe

Hi Joe,

I promised not to shy away from any tough topics or questions, so thanks for writing in with this one. I don’t know if you’ll appreciate my answer, but I’ll at least give it a try.

I switched my career from a corporate high-tech executive to investment analyst back in 2015, and I only ever worked in one organization. 

Originally I was publishing under the Bonner & Partners banner with Bill Bonner, which was a great pleasure for me to get to know Bill. He’s an amazing writer and has an incredible history that spans more than 40 years in newsletters.

My research business grew a lot between 2015-2019 and eventually became almost all of Bonner & Partners, which precipitated the rebranding to Brownstone Research in 2020. Nothing changed other than the name. My team was the same — it just didn’t make sense to call the business Bonner & Partners anymore.

I really don’t have an insider’s view on the rest of the industry. I only ever worked with one team — my team — and we had very strict rules about how we conducted business. 

I was always prohibited from investing in anything that I recommended, and I couldn’t recommend anything that I already owned. Doing so ensured that there would be no conflicts of interest. And my team and I never receive (or received) any forms of payment/compensation for recommending any companies or digital assets.

These operating principles are consistent across Legacy Research and all of MarketWise. I did see that there was an SEC filing concerning Legacy Research, and according to the filing, MarketWise took quick action to address the issue that was discovered. That’s the right thing to do.

I do know some of the other newsletter executives personally, like Steve Sjuggerud, Doc Eifrig, and Porter Stansberry, among others. These are all professionals that take the operating principles seriously and wouldn’t ever tolerate any violations of any kind. I did not work with Palm Beach at all, so I really can’t comment.

My team and I were very conscious to keep a very tight loop on any and all research that we were working on. We controlled the material and content carefully so that there were never any leaks of any kind, and when we had Zoom calls, we would never mention the name of any companies or assets that we were researching and might recommend. At times, we even used code words. We really were that careful, and I’ll continue to do the same going forward.

I started reading independent newsletters in the late 90s, so I also have a similar perspective as you do. One thing that always was a red flag to me was newsletter writers that were compensated for writing about a company. 

Obviously, when that happens, the information is biased. It doesn’t necessarily mean that its bad, or that its wrong, it just introduces risk into the investment research. So as a subscriber, I tended to avoid research where there might be any conflicts of interest.

And one of the many things that I always watch out for when research comes out of Wall Street is where it’s coming from. 

For example, investment banks also produce investment research and then talk about it on CNBC. But they promote their research and predictions on a company after they have already put their clients into the stock.

There are also some well-known short research firms that publish a short thesis on a stock explaining why they think it will collapse in value. What they don’t tell you is that they already built their short position in that stock and they are hoping that by pushing their research, the stock will fall.

In these cases, they are ”selling their book.” They’ve already built their positions and hope to drive the stock up or down by getting more money and investors to follow them. And when they close out their position for a big profit, the don’t tell us, often times leaving retail investors holding the bag. I can’t stand these kinds of shenanigans.

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