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Robert McHugh Objects to Our Evaluation of His Commentaries

| | Posted in: Individual Gurus

Robert McHugh, Ph.D. sent comments on our review of his stock market commentaries (“Robert McHugh: Caution Is Warranted”). The following exchange presents Dr. McHugh’s messages without editing. We have edited our responses for formality, brevity and inclusion of links:

Dr. McHugh writes (11/29/06):

Your analysis is garbage. Unless you are a paid subscriber gaining access to our proprietary signals, you cannot even begin to measure our success. Safehaven is a risk analysis commentary forum, not a forecast forum. We are pointing out risks on that site, not making forecasts. Pure garbage. I expect a retraction or you’ll be hearing from my lawyers.

Response (11/29/06):

We will correct any error found in CXOadvisory.com. However, your statement that the “analysis is garbage” does not identify any errors.

The purpose of Guru Grades is to measure whether experts can provide reliable stock market timing guidance. The methodology employed in the Guru Grades section of CXOadvisory.com, as stated, includes:

“We restrict reviews to publicly available material, putting ourselves in the place of an individual investor trying to locate value in the marketplace, and mindful of concerns about copyright and trade secrets. Sometimes we find public records on the web sites of the experts themselves and sometimes on web sites of other parties. This approach helps keep a level playing field for reviews, and it allows readers to check the reasonableness of our judgments should they choose to do so.”

You state that: “Safehaven [the source of your reviewed commentaries] is a risk analysis commentary forum, not a forecast forum. We are pointing out risks on that site, not making forecasts.”

However, many of your commentaries there do discuss future prospects for the stock market in reasonably specific terms.

You state that: “Unless you are a paid subscriber gaining access to our proprietary signals, you cannot even begin to measure our success.”

If, by “success,” you mean financial success, Guru Grades makes no attempt to measure the financial success of your advisory service or any set of your specific investment recommendations.

The information at Guru Grades is transparent with respect to methodology and data, noting explicitly that the reviews involve judgment. Whether these reviews have any value to readers is up to the readers.

Again, we will ensure correction of any error found in cxoadvisory.com, but reasonable specificity is essential.

As an additional level of transparency, we will post your comments in cxoadvisory.com to alert readers regarding your opinion. If there is anything else you would like the readers of cxoadvisory.com to know, please advise.

Dr. McHugh follows up (11/30/06):

Your response is completely unsatisfactory and your disclaimer misses the exposure. I do not present forescasts [sic] on www.safehaven.com, never have, and never will. I have buy and sell signals for paid subscribers only at my own site. Forecasts and risk analysis are two completely different things. You have taken risk analysis of potential risks to the market I occasionally present on safehaven and decided by your own whim to pretend and state that they are forecasts. That is erroneous, and damaging to my reputation. You are liable for the loss of any subscription cancelations [sic] that I incurr [sic] because or your misleading report, and for any damage to my future business. I have forwarded this matter to my attorneys. You should immediately remove my name and service from your list, and publish a retraction stating that “McHugh’s service does not provide market forecasts at the safehaven site, but rather simply provides risk analysis, therefore it was erroneous of us to judge his articles on a basis that forecasts were being made.”

If I were you, I’d take care of this matter immediately.

Response (12/4/06):

Based on your concerns, we have re-evaluated the review of your commentaries at Safe Haven and made minor changes.

However, given the nature of the content of these commentaries, your distinction between risk analysis and forecasting seems to be one without a difference. In general, forecasts are integral parts of risk analyses — one cannot assess risks without looking forward. Your typical commentary includes a survey of outlooks based on indicators you deem most relevant to future investment returns, along with a synthesis of this survey into a “bottom line” outlook. The review at cxoadvisory.com relies principally on your syntheses, many of which are fairly specific with respect to your outlook for the overall stock market. This approach to reviewing your commentaries is reasonable.

Regardless, CXO Advisory Group LLC is completely within its rights to review and express opinions about any publicly available information, including your commentaries at Safe Haven. We clearly describe the methodology we use in reviews, and its limitations, on cxoadvisory.com.

CXO Advisory Group LLC accepts no liability for the results of your business. The reviews at cxoadvisory.com involve judgment, but they do not intentionally mislead. Both the facts and the judgments in these reviews are visible and open to challenge, and cxoadvisory.com reports and responds to challenges from reviewed experts transparently. (See, for example, the exchanges with Jim Cramer, Jason Kelly and Jack Schannep.)

If you know of any factual errors in the review of your commentaries on cxoadvisory.com, please advise so that we can make corrections. Feel free also to challenge specific judgments regarding assessment of your commentaries.

In keeping with past practice, we are posting your objections at cxoadvisory.com. With ready access to our review, your objections and the source commentaries at Safe Haven, readers can readily decide for themselves whether the review has value for them.

If there is anything else you would like the readers of cxoadvisory.com to know, please advise.

Dr. McHugh follows up again (12/4/06):

You judge what essentially is occasional marketing editorials, with no forecasts, but risk analysis. You miss the daily forecast signals privy to subscribers who pay. I have a 100 percent correct track record of forecasting turns with my phi mate analysis. I have over an 80 percent accurate track record with my buy and sell signals, and have a Guest Article by an independent Futures broker who states that. Your response is unsatisfactory. Your analysis is incomplete and misleading and defamatory.

See you in court.

Dr. McHugh writes again (10/22/07):

Your evaluation is wrong. My track record is excellent. If you study my key trendfinder indicators, the PPI and DP/SP and others, you will see the performance is extraordinary. My returns on four trades in 2007: 33 percent, 44 percent, 88 percent, and 103 percent. Your evaluation is obvoiusly [sic] flawed. If you can;t [sic] do it properly, then exclude me from your population, otherwise your evaluation is fraud.

Response (10/26/07):

To clarify your proposition, you hold that the results of four trades in 2007 completely refute the assessment of 93 of your commentaries with respect to the outlook for the U.S. stock market from the past three and one half years. This proposition is unreasonable, and excluding data from a study based on it is unsound.

Assuming that your four trades are independent, and you have no losing trades, then the capital applied to all four has a cumulative return of about 630% so far in 2007. Such a return applied to a substantial initial investment would indeed be extraordinary. Many investors would be interested in an independent assessment of the reliability of such a return.

If you choose to make publicly available an historical sample of your PPI and DP/SP indicators (with clear definitions) large enough to support reasonably reliable inference, we will conduct and present the results of an analysis, similar in nature to that in our review of Mark Hulbert’s sentiment indicator.

In accordance with past practice, we are posting this exchange with your prior comments so that readers can understand your views and decide for themselves what to believe.

We verified the sender’s identity by comparing the sender’s email address with that provided with the source commentaries at Safe Haven and by consistent response following successful reply to the email address.

As always, we suggest readers decide for themselves which sources have value, and which do not.

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