Bill O'Reilly Update: This is Not a Scam

Last Updated Aug 27, 2010 3:20 PM EDT

When last we left our hero, Fox News' Bill O'Reilly still appeared to be ignorant of the fact that his name and likeness were going to be used to pitch a smarmy investment newsletter.

Here's what's happened since I wrote "Bill O'Reilly Duped by Faux News?".

New York Times media writer Brian Stelter got O'Reily's agent and a representative from Newsmax to agree that they both knew that a newsletter was going to be mentioned on the show. O'Reilly was paid for his appearance, but no one is saying how much. O'Reilly has failed to respond to the NYT or me.

"The issue of mentioning the newsletter offer was clear, though not to Fox, which actually had nothing to do with this," Newsmax pitchman Scott Rosenblum confirmed in an email to me.

Meanwhile, Rosenblum thought I had been too harsh about Newsmax and its recommendation of a newsletter edited by Bill Spetrino -- a man Newsmax refers to as an "esteemed accountant."

"The investment is not a scam," Rosenblum said in his email. "Spetrino is indeed a CPA...Attached you will find a summary about the Dividend Machine's entirely legitimate returns. From this data, it shows that the conservative portfolio is up 42.73% and the aggressive portfolio is up 23.48% since inception (May 2009)."

I checked. The result isn't pretty.

It turns out that Spetrino's credentials were a "misunderstanding." If Spetrino were a CPA, he would be licensed. When I asked in which state he was licensed, Newsmax CEO Christopher Ruddy responded that Spetrino actually is not a CPA. He graduated college with an accounting degree, Ruddy said. Spetrino holds no professional designations, according to Newsmax.

I tried to verify that he graduated college, but Newsmax would not provide Spetrino's birthdate, which is required by the college verification service. Spetrino's birthdate is "private" information, according to Rosenblum. Spetrino failed to respond to my request for an interview.

Spetrino's book, "Consume, Consume and Consume More" is self published and not available for resale.

As for the returns touted by the newsletter? Let's just say that if Spetrino did graduate with an accounting degree, he's not making good use of it.

I asked for either an audit of his newsletter's returns or a copy of each of the newsletters so that I could audit the returns myself. I got a summarized chart of Spetrino's claimed returns, as well as each newsletter.

Here's the short version: I can't come up with Spetrino's claimed returns no matter how hard I try.

If I give him every benefit of the doubt -- assuming that his investors bought at his supposed "entry price" and received all the dividends that he claims -- you end up with far lower returns than the ones advertised. And, in reality, buying at that "entry price" would have been impossible for one of Spetrino's subscribers. I'll explain why in a minute.

If you calculate the returns based on the percentage of assets that Spetrino suggested you invest and pretend that you got in at his artificially low entry price, his "conservative portfolio" is up 26% and his "aggressive portfolio" is up 6%. (If you assume that you earned 1% on the cash in each of those portfolios, the returns are fractionally better -- about 6.5% for the "aggressive" portfolio (which was 47% cash) and 26.2% for the "conservative" portfolio.)

During the same time, the Dow Jones industrial average gained 33%; the S&P 500 gained 32% and the NASDAQ gained 38%. So by following Spetrino's costly advice, you would have underperformed the market by, well, a lot.

It gets worse.

If you wanted to look at the returns that Spetrino's subscribers could have earned by following his advice, the results are even lower. Why? I'll save you hours of pouring through the drivel in the newsletters and provide just one example.

Spetrino's first newsletter is labeled "May 2009." His first stock purchase is Johnson & Johnson, which he says he bought on April 28th, 2009 at $50.65. The problem: He didn't provide the newsletter to subscribers until after June 1, when the stock had already appreciated to $55.16, which was out of Spetrino's recommended "buying range." If you were following his advice, you never put 8% of your portfolio in JNJ at $50.65. If you were lucky, you might have "bought on dips" -- as he advised -- sometime later, at a higher price.

In fact, all five of the recommendations Spetrino made in that first newsletter were out of his targeted purchase range by the time subscribers would have received the advice. How do I know this? He conveniently provided the "current price" of each stock in the chart that showed his "entry date" and "entry price." The day that "current price" was reached is listed as a footnote in the newsletter, indicating that subscribers didn't get this sage recommendation until sometime after June 1 -- more than a month after Spetrino supposedly picked up the first shares of stock for his recommended portfolio.

Newsmax' Rosenblum is checking on the disparity in advertised and actual returns. I'll update you when I hear the explanation. For now, I'm going to guess it's another "misunderstanding."

I will agree with one thing that Newsmax's Rosenblum says (which, amusingly, Spetrino says in his own advertisements on his web site). "This is not a scam."

The way they get you to buy the newsletter is misleading and the advice is bad, but I don't know how you could call investing in Johnson & Johnson a scam. It's more like getting investment advice from my grandmother. But she was better at math.

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