Charlatans and unethical scam artists don’t come right out and tell you they are attempting to make you part with your money while providing absolutely no value. The most skilled will tell you they are doing something altruistically and that they want to simply teach you what they’ve learned – for the small price of a subscription service or enrollment into their more intensive (and more expensive) classroom lessons.Lately, the most ubiquitous ploy on the financial channels is a commercial for some guy named Chuck who ostensibly is an investment genius willing to share his secret formula for beating the market with the unwashed masses for the pittance of postage on his new book “Trade Like Chuck: How to create income in ANY MARKET!”. Performing a quick Google search of his name and scam will tell you more than you need to know about avoiding such “sure-fire” trading systems and the ensuing hard sales pitch for their training courses costing between $6,000 and $15,000 upfront. Of course, if that wasn’t proof enough you can also see his horrific 1 ½ star rating under the book section on Amazon which is only slightly better than the 2 ½ stars for CNBC regulars Jon and Pete Najarian’s “How We Trade Options Building Wealth, Creating Income and Reducing Risk.”
I always recommend investigating the author or salesperson in detail before you buy or read anything. Who’s writing this and what’s his bias? What’s his agenda? Look the author up on Google. Find out all you can about him before you read what he has to say. One reason I enjoy reading what academics have to say is that in most cases, they are not selling anything, although they will still have a bias. Like a good analyst, we must learn to be a cynic – particularly in financial matters.
Warren Buffet advised a class of graduating MBA’s at Columbia University to read 500 pages a day. That’s an ambitious schedule for someone running a business but I try to read 50-100 pages every day so I am schooled on the topics that affect the financial lives of our clients. Wisdom isn’t innate; it is acquired from reading continuously during a lifetime. It is this education of accumulated facts which shapes your brain into fertile soil from which to grow a productive crop to make educated investment decisions. It’s important for us to turn off our TVs, cultivate an intellectual curiosity and read. We live in a time of unprecedented access to knowledge and should take advantage of it.
Sometimes the commercial pitches aren’t as easy to spot as they appear in the news itself. In addition to the financial advisors and money managers — whether Bulls or Bears — appearing to promote their own self-interests, major investment bank analysts pop up with regularity to promote their agendas. The analysts you generally see on a financial news program are typically sell-side analysts who do the heavy lifting for public consumption and the mass media. Sell-side analysts do what their name implies, they sell investment products, ostensibly by providing viewers with buy/sell recommendations they presumably believe in, but because they are pitching stocks or other investments for a reason — in some cases, because their firm’s trading desk is wallowing in an issue they need to liquidate or distribute — their advice should be viewed with extreme skepticism.
The darker side of financial news guests includes people like Henry Blodget, the quintessential example of a sell-side hustler. Blodget is a former equity research analyst for CIBC Oppenheimer and the head of the global Internet research team at Merrill Lynch during the dot-com era. His violations of securities laws resulted in his being banned for life from involvement in the securities industry.
His scandalous conduct included publicly touting certain internet stocks while privately describing them as “dogs” or “POS” (pieces of shit). He was fined $4 million and the SEC banned him for life from working in financial services industry. That banishment didn’t slow Henry up much or prevent him from becoming even wealthier in 2015, however, when he sold the financial news and gossip site he founded eight years previous for $343 million. Blodget is now a regular guest on CNBC and other financial news shows and blogs. Obviously, having a tarnished reputation is no obstacle to being sought out by an indiscriminate financial media purporting to provide their audience with “sound investment advice.”
The bottom line is that you should remain very skeptical of the things you see on television. We are generally much better off understanding that television should simply be used for entertainment and find a good book (generally from academia) in order to educate ourselves should we want to learn more about a particular topic. If you are looking for some good books on finance as the summer approaches, you may visit my blog for five of my favorites at: http://info.altrius-capital.com/blog/summer-reading-list.