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No. of Recommendations: 23
Gabatya,

Thank you for posting. I am going to give you some very direct responses, and I hope you take them correctly.

You every right to expect good performance, but only over time. Not this week, this month, this year. Anything less than 5 years, and I say 3-5 because I give up most of the time to people's impatience, is NOT a measure of investment performance. The financial world SELLS you that you can have it, but you cannot.

Special Ops does not "sell." Even in our marketing materials, my record is accurate and our choice of EnergySolutions a sound one based on potential reward for risk.

The only proven strategies -- over decades (David Swenson's book, Fama and French at Chicago and Dartmouth, and the experience of Graham and early Buffett) -- are low price to book (a form of deep value) and momentum (buying what others buy, sell what they sell). The latter is not proven experientially, because no one knows when the momentum will turn. And all it takes is one big wipeout for you to lose your capital. Ooops! William O'Neill's whole business is built around selling people momentum investing. It is sound in thinking. Can you do it? For a year? For five? And not lose capital permanently? Good luck.

Normally I try to be gracious and supportive with investors who are new and trying to understand. But honestly, in 12 years of being in the member management business, I have never encountered such a hodgepodge of inaccuracies, fuzzy headedness, or complete lack of responsibility for actually spending 10 minutes trying to look around a site to answer.

Ask every buying in Netflix from $200 to $300 how they feel today. And then ask them what they have to see happen at Netflix to outperform the market over the next years. They pay too much for too little reward and too much risk. PROCESS is everything. Results are uncontrollable (except that you can sell, of course).

Let's start.

You are factually wrong in about half these instances. These are facts, not opinions, and I can only assume you have spent no time reading our materials. None. I personally have spent countless hours putting these together, and they answer each and every one of these -- sometimes 5 or 10 times. You have been investing for 40 years. I cannot believe that you have done this and still somehow care whether stocks "move with the market" in a week. It is incomprehensible to me that anyone could pay the slightest attention to this and be profitable over your time -- if this is indeed how you measure yourself.

Of course you see that we are down versus the S&P 500. Have you looked at other TMF services lately? Do you you understand that we are a portfolio service, not a "pick of the month" service? Do you know what means? You say you are "lousy at math." How can you be an investor and be lousy at math? All it takes is elementary school arithmetic. Not algebra or anything beyond that. Are you being sarcastic?

You MUST put some effort into finding the answers to your questions and not expect that people will put them in your lap, when they already have. Over and over. I know we live in a world where there is an enormous sense of entitlement, but people also have responsibilities. $1500 does not entitle anyone to do something they do not want nor to not read one iota of what we do.

Now, all that said, and with the same bluntness with which you post, I attempt to answer some of the questions that -- while they completely astonish me -- perhaps can help you for the next 20 or 30 years.

1. "does any one out there look at the special op performance? when are these special situations start to show? Why are all of these recommendations down at all times whether the market is up or down.

Of course members look at performance, and they follow it on their scorecard. Our evaluation of the scorecard data (anonymously as to person, of course) shows that our members do better than we do. Why? Because they buy before we do (after we recommend), and sell before we do (after we recommend). Consider Box Ships. We recommended another 1% last Thursday and the stock has shot up. But we have to buy. We gave up 5 percentage points, more or less.

This is true across all TMF real money portfolio services. It is NOT an excuse, it is a reason.

Also, once our members get experience, many know to wait when a stock pops up on member buying. Markets move up and down, and despite your incomprehensible wish for stocks that move with the market, some know to wait and "buy low." Isn't that the idea? Am I missing something? I have been investing for 34 years. Not quite 40. Perhaps those 6 contain wisdom I missed. While I was doing what a lot of people in the 70s were doing. :-)

2. why each one of them does not have a record to go by.

There is. Go to closed transactions. Draw your own conclusions from performance of each versus S&P 500: http://newsletters.fool.com/52/recommendations/closed.aspx#t...

Then, why, on earth, would we measure each stock by the S&P 500? We manage a portfolio, as you do. Don't you look at all your stocks together for your return? Or do you actually look at each one only and measure it? That makes no sense to me. See your last question.

3. I know that no one is trying to give us a bad advice but i need to know what is going on.

Well, how about actually reading what we write? Reading each Monday's briefing commentary and our three -- THREE, wow, that's a lot to digest -- guides?

At the top of the page is a tab called "Alerts & Coverage." Go there. http://newsletters.fool.com/52/coverage/index.aspx

Look to the right at "All our resources." Read them. Reading all of them -- you don't need to read the options one -- takes maybe a half hour if you read slowly and 15 minutes if you read quickly. Slow is good, by the way.

4. i have been investing for over 40 years and have never gotten myself in a situation like this with a bunch of stocks that do not, do not move with the market.

This cannot be. You want to own stocks that move with the market? Why not just buy the S&P 500? Then you can move with the market up and down all you want. READ THIS.

5. is it that no one in this wide world knows what we know or is it that we have a different vision all togather?

If you do what others do, you will have average returns.

"If you buy the same securities as other people, you will have the same results as other people. It is impossible to produce a superior performance unless you do something different from the majority. To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude and pays the greatest reward. -" Sir John Templeton

If this were easy, everyone would do it. Most investors are like you. Impatient, uncertain how to measure returns, just wanting "stocks that go up," experiencing a bear market, deciding they don't know what to do, and then being masochists by buying AGAIN when the market is going up! up! up!

That is great in 2007, and lousy in 2008 (not that we believe the calendar makes an iota of difference). Did you know that from the time Buffett closed his hedge fund to run Berkshire exclusively, it dropped 49% to the end of the 1973-74 crash? Wow. I'll bet you would have sold. Many did (obviously). Did you know it multiplied roughly 32 times over the next 8 years? This is all hindsight, I know, but if you want lovely returns every week, good luck. This is not what any service at TMF does.

6. I am truely puzzled on how come each one of these recommendation is down from where it was recommended with no exception?

Uh, what page are you on?
Are you reading the right page? Or the right service? http://newsletters.fool.com/52/recommendations/index.aspx

As I've said, our Recommendations table and closed positions show that you are factually incorrect. "Green" is up and "red" is down. Your math may be lousy, but I am sure you can 11 of our current positions -- one less than half -- are up. I don't count the Oxford covered calls because TMF's tracking system doesn't do well with written options. Another story.

And if you add closed positions -- the tab at the ton of the table -- the "green" outnumber the "red." This is easy math. Even I can do. :-)

"No exception?" Are you in the same reality we are?

To repeat: Look at the return column. Red means down from average purchase price. Count up the red. Then look at the green ones. Count up the green. Then look at closed transactions:

y. Who in the world can invest this much money and in so many issues and in a week like this week is left behind? Who can manage to be at all times behind the S&P average?? I need some one to explain. Assume we hold on for a total of 3 years and assume we some how manage to make 40 percent on 50 percent of the total and fail on 10 percent and get bankrupted in two cases and come up even on the rest. My math is lousy would some one figure it out? I am telling you i am as confused as never before.

It all depends on whether you manage your risk by position sizing. There is no answer to your last question.

We can only do a strategy that has been around since its founding in the early 1930s by Benjamin Graham, probably the first investor to use "special situations" as applied to activist investing.

Every industry person knows that if you have a good first year or so, you can slide on that for years. I know a guy who was up over 300% his first year after fees in his hedge fund. Since then, mediocre. You, undoubtedly, would look at his returns and go, "Wow! Join up!" after the 300%, just in time to have...mediocre (below market) returns. This is what makes investors in even the most successful mutual funds -- take Ken Heebner's monumental CGM Focus Fund -- lose money.

Do you know how long it stock advisor to do well? Have you looked at Hidden Gems' stock performance over the last several years? Other TMF services of all costs? We have been in a momentum fueled frenzy market for over two years.

Okay, here's some math for you.

A. You have 100% cash. Market goes up. You underperform. (We started with 100% cash. Market went down and then straight up from Sept. 2010 to April 2011. How do you think we did? Yet our stocks outperformed.

B. Our average stock has beaten the market by three percentage points. Why doesn't it show up that way? Because we went from 100% cash 6% over 18 months. That's what happens when you start. If we had invested it all in March 2010, well, it would be worse and members would not be in the position they are in.

C. Of course over time you and I both expect outperformance. And I cannot guarantee you any performance. But what I can guarantee is that if you pay attention, you will understand every answer to your question.

Do what others do, and you will have their performance. Have you noticed how the S&P 500, including dividends, has done for the last 10-12 years? (the last week notwithstanding?). Have you noticed that we have narrowed our relative return? And that's buying after members and selling after.

Finally, on Monday Jim Royal will write a clear column on the history of the strategy, a few examples, and a book to read. It's a fun book. Easy and clear.

Gabatya, I took the time to write this to provide some tough love. You need it. If someone doesn't shake you up, you are going to persist in misconceptions, confusion, and outright ignorance.

I personally don't care if you are a member or not. Because it's YOUR decision that matters. You need to want to be here to learn, be patient, and watch what happens. You need to understand what it is we do. If it weren't different, we wouldn't practice a strategy that is contrarian.

I was fortunate when I began doing this in late 2002, fully starting in January 2003. My first year was insanely great -- up 134% I think. But I also outperformed in many subsequent years and had a demonstrated record from 2003-2009 (TMF hired me back in 2010) that was good enough for TMF to put itself behind me.

How will I and Mike and Jim do? Don't know. But you do need patience.

As Buffett knows from 1968 or so through the end of 1974, you can go as much as six years and have a lousy record. And then, well, the train leaves.

Will we do that? I sincerely doubt it. But it's the best example I know of buying low, waiting, and seeing.

Our special situations will generally play out or not in a few years or less. Our average stock has been owned for half of our 18.5 months. If you want results from each stock in 9.25 months, good luck finding it.

Look at Stock Advisor. Look at how few stocks are responsible for David G's returns. If you applied your thinking to that, you would never invest there. How could you know which ones to buy and for how long? The average return per pick stocks are measured EACH against the S&P, assuming you will decide. What if you pick all the wrong ones?

The portfolio management services -- Million Dollar Portfolio, Hidden Gems, Pro, Alpha and Special Ops -- look at them. See how the last few years of Federal Reserve fueled market frenzy have done. Yet all of us I believe will show portfolio outperforming over time.

It might be a long time. Wow, it might be a few years! OH NO!

You want stocks that aren't correlated with the market. They will lag in up markets (not correlated) and outperform in bad ones. Most investors want to outperform in up and miraculously not lose money in down. But most buy and sell low.

You can make money two ways, but only thinking portfolio management:

1. Outperform in up markets, do worse in down markets, hoping that the upside does better than the downside.

2. Lag in up (as we have) and try to keep close (our difference in the momentum market of the last two-three years is quite good historically) to the average, and then do better in down markets.

This is complicated by our combination of small caps which are more volatile due to liquidity -- how much dollar volume is traded per day. Over time I believe we will achieve #2, but there are no guarantees.

We care that members do better, and so far our stats show they are.

And I invest 90% of my money in Special Ops -- all the stocks (though I wish I could stop writing about Box Ships to buy acceding to TMF rules for us -- and of course missed what 16% or more since first buy? Don't cry for me.). I have very incentive to do well. How many other advisors do that? The pick per month cannot -- makes no sense. And others have limitations (options especially -- members buy and your buying is almost foreclosed by pricing). Or still others manage services due to company needs that do not fit their styles (but they are very good at what they do).

NO GUARANTEES at Special Ops except two: If you invest according to the portfolio and do exactly what we do, you will not lose capital permanently across the port. And two, you will, if you are open and patience, and do some work, change the way you look at investing forever.

But if everyone could do that, everyone would do what we do. Fortunately, human nature precludes that.

I'm not going to change for this week or that. And I LIKE diverging from the market. It means I'm doing my job. And Mike, Jim and I are not going to change for the fashion of the moment. Financial services tell you it can be done.

It cannot.

Good luck whatever you do. But this has been some straight talk. You were blunt and you asked. I am blunt and I answered.

Please, members, share your experiences -- of any kind! -- with gabatya. It will mean more coming from you than from me.

Thank you for your post and for being a Special Ops member.

Yours, Tom
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