Here is Chris Sayce's official reply. He says this one can be posted. So here it is. Strange, that no one has mentioned it in the last 2 hours since it's been released.
This is it. In full. * ----------------------------------------------- Australian Small Cap Investigator Monday, 2 November 2009 Melbourne, Australia By Kris Sayce
A Special Announcement from Australian Small Cap Investigator
There's no market update or stock tip updates this week. Instead I wanted to concentrate on some of the feedback I've received following the two stock tips I sent out last week. And by the way, if you're one of the readers who distributes copyrighted material to message boards, please feel free to do so in this case (you were probably going to do it anyway). I'd like non-paying subscribers to see it as well, so they can see how the newsletter gets put together and is published to paying subscribers.
The main question I want to take up here is how best to make the latest issue of the newsletter available to you. Should I do it during the day when the market is open, or after hours?
It's clearly an issue because there have been several occasions where shares I recommended gapped up before you could reasonably expected to have bought them at the price I recommended. It would make the share tips pretty useless if they regularly gapped up before you could buy them. And the point of all this is to find great small cap companies, not creating timing problems that jeopardise the value of the research I've done.
So let me address a few questions and see if we can solve the problem:
Question: Is there a way to guarantee everyone receives the e-mail with the new share tip at exactly the same time?
Answer: To the best of my knowledge, no. There are over 10,000 paid subscribers to the Australian Small Cap Investigator. Our email server, based in Baltimore, Maryland in the US, where our parent company is located, can send all those out in around two minutes flat.
But whether or not they get to you in that time depends on what happens when they go to your Internet service and email provider. As far as I know, there shouldn't be big gaps between when I send them and you receive them. But there probably are some gaps, and there doesn't appear to be much I can do about that once I hit the send button.
Right now, my publisher and I are investigating methods that would ensure simultaneous delivery of all 10,000 plus emails. If you have any suggestions on how we can achieve this (technical solutions or otherwise), send us a note to [email protected] and put "ASI email suggestions" in the subject line.
Question: Would sending out the email after the market closes ensure that the shares don't gap up at the open?
Answer: No. It's likely that the gaps at the open would be even larger if the share recommendations went out after hours. It means that all the buy orders would stack up overnight or over the weekend.
You might get filled close to the entry price. You might get filled at a much higher price. Either way, I suspect that posting the recommendations after hours would almost guarantee even more volatility. If the main problem is preventing big jumps in the share price, I don't see how sending the e-mails after trading hours solves that problem.
My objective is to transmit the share recommendation to you in a way that makes it possible for you to buy at the price I target. As I've said, I'm not convinced that delaying publication of the recommendation until after the market close solves that problem at all. But it may solve another problem: the issue of fairness.
As far as I can tell, the major complaint (other than the accusation that I or someone from my organisation is front running the stock tips, which I'll get to below) is that it's simply not fair that some people get the emails minutes earlier (a process I have no control over at the moment). Those people who get the email first read about the share and have a chance to buy it a lower price simply because the e-mail goes straight through to their inbox or their ISP does not hold it up.
I assure you, I'm exploring ways to eliminate this unfairness. It would be better for everyone if we could solve this problem. Another possible way is to send you an SMS to let you know the new recommendation will be posted to the website after hours. Granted, I can't guarantee everyone gets the SMS either. But you're more likely to have your mobile on you than you are to be at your computer.
Listen, I'm happy to take suggestions. If you have other suggestions, please let me know. But even if we find a fair way to notify every one of the new recommendations, I'm still not convinced it will prevent the shares from gapping up at the open, which brings me to a serious issue.
Question: Are the share tips in your newsletter being leaked to anyone else ahead of time, before you receive the email?
Answer: No. If anyone here were receiving advance knowledge of what I'm tipping, it would constitute front running. Not only is that bad for business-ripping off your customers whom you've spent months trying to establish trust with-but it's illegal. It would jeopardise my entire business. That's why no one who works at Port Phillip Publishing (the company that publishes ASI) is allowed to own shares any of the shares we tip.
The only people that see my articles before you are the compliance officer, my publisher Dan Denning, and our graphic designer. They are prohibited under the terms of their employment contracts from buying the shares or communicating their names to relatives and friends (as am I, of course).
Once the report is edited, signed off by the compliance officer and publisher, and designed, it gets posted straight to the website and you're notified immediately via email. There's no time in this process for any information to be leaked.
Believe me, this is an issue everyone here takes quite seriously. Our entire business depends on our good name and credibility. We keep a regular eye on volume activity in the shares we tip to see what's going on and anything unusual gets investigated.
It's possible, although frankly I'm not sure how, that knowledge of what we're recommending is getting out in some other way that we can prevent. But you should know it's an issue we constantly monitor in order to be compliant with both the sprit and the letter of the law.
Question: What else can I realistically do to prevent shares gapping up like this after I recommend them?
Answer: The simplest way for me to avoid this problem is to no longer recommend shares under a certain market capitalisation. I'd combine this with a requirement that all of the shares recommended must meet a certain level of liquidity before they make the cut. I'd hate to do that because it would mean excluding some great small companies from the pages of Australian Small Cap Investigator.
But if featuring these companies in the pages of the newsletter is causing more trouble than it's worth-that is, if you are losing money simply because you're getting whipsawed by the share price volatility-it might be the best solution for all of us. Losing money because of share price swings is entirely different than losing money because you were wrong about the stock. It also defeats the purpose of taking a punt on these small plays.
The last thing I want to do is provide a research service that turns into a track meet, where 10,000 people are competing against each other to get into a share price first and benefit from a surge in liquidity. That's just gambling. It completely defeats the purpose of intelligent speculation, where I try to research the company and understand the business and get it at a good price.
So I'm considering my options here. The main option is to cease writing about the micro caps altogether. I may do this, because frankly, it is not worth the risk to my business to have some readers levelling false charges of front running at me and running off to ASIC.
Another option is to limit the number of readers arbitrarily, or to launch a new micro-cap only ($100m m/cap and under), but charge $2,500 for it to keep the number of subscribers low. One reason I might do that is that the illegal distribution of the newsletter has become a major problem that requires a solution. This brings me to my next question.
Question: Does posting the recommendations on a message board harm everyone's interests?
Answer: Yes. Other message board readers can profit from the knowledge of knowing what to buy at what entry price, and what stop loss to set. If you are sharing that information, frankly, you are an idiot, even if you're a well-intentioned idiot seeking the opinion of others. Here's a warning: don't expect other traders to have your best interests at heart.
Anyone who posts illegal copies of the newsletter to a message board or to multiple friends has completely missed the point of this service. You are harming your own interests and those of your fellow subscribers who have paid good money, in good faith, for the opportunity to profit from these great small companies. Moreover, if you are sharing or distributing that information, you are also breaking the law.
From here on out, when I find out someone is posting copyrighted material to a message board, their subscription will be terminated immediately. Please don't think we can't tell when this happens. I and my publisher will also explore legal options against those posting copies of the newsletter illegally. We'll work with the message board providers directly to identify repeat offenders.
You should know that I really don't want to do this. It's expensive and not what my business is about. It costs money and takes time. But sharing copyrighted material on message boards damages my interests and the interests of ALL readers. It will not be tolerated and we will put a stop to it one way or another. Our lawyers have been put on alert.
To wrap this discussion up, if there's a way for me to ensure that everyone gets the same e-mail at the same time, or to otherwise ensure the release of the reports doesn't lead to a gap in the price, I'm all ears. You can reach me at [email protected].
For now, my plan is to listen to your feedback, possibly begin releasing the reports after hours on the weekends to be fair...to ruthlessly pursue the low lifes who are distributing copyrighted material for free on message boards. And, so we can focus on profiting from great small companies, I'll look into a micro-cap only service that helps eliminate the problems of writing about small shares to a large and eager audience.
This would only apply a small number of the shares I research and recommend. But by investigating them in a separate service, it might improve things for everyone. So I'll keep you posted.
Until next time,
Kris Sayce.
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Calculating Your Future Returns
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For any investment, never invest more than you can afford to lose, and keep in mind the ultimate risk is that you can lose whatever you’ve invested. If in doubt of the suitability of an investment please seek independent financial advice.
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