Financial Pornography Thrives
SmartMoney recently published an article entitled "15 Great Stocks From the Great Depression." The purpose of the article was to show investors that there were some great opportunities for bottom fishing when the markets tanked.
The premise is that this information should help investors pick outperforming stocks in this bear market.
While the article is interesting, the premise is flawed. It perpetuates the myth that stock picking is a worthy endeavor for investors. Worse, it feeds the false belief that relying on the expertise of the financial media is helpful to investors seeking to improve their returns.
Last year around this time, SmartMoney identified 12 companies around the world that it predicted would have stellar profits in 2008. It did so with great confidence, noting "[A] rocky stock market and fears of an economic slowdown have investors wondering what to do next. We've got the answer."
It did have an answer. Unfortunately, it was the wrong one.
Investors who relied on its predictions lost an average of 52.4% of their investment. One recommended stock dropped by more than 88%.
Readers of SmartMoney would have been better off investing in an S&P 500 index fund. It lost only 40.2%. They could also have saved the cost of SmartMoney.
SmartMoney's track record is no worse than its competitors.
In an article published December 2007, Business Week surveyed "a half-dozen market strategists with a cumulative 175 years of experience." They predicted where they thought the DJIA would be at the end of 2008.
The predictions of these distinguished experts ranged from a low of 12,500 to a high of 16,000. The most bullish of the group was Elaine Garzarelli who found her fifteen minutes of fame when she correctly predicted the 1987 crash. Ms. Garzarelli checked an impressive list of fourteen indicators she followed and concluded that the S&P and Dow were poised for a 20% increase. Her advice was very precise. She recommended Lehman Brothers (now bankrupt), Bear Stearns (no longer in business) and Merrill Lynch (sold in a fire sale to Bank of America).
Forbes picked Nvidia as its "Company of the Year" in January, 2008. Its stock dropped by more than 75% during the ensuing year.
The list is endless and so is the damage to guileless investors who rely on these publications and on the highly confident financial pundits on TV who regale us with their market insights and theatrical antics.
Can we just call this what is? Financial pornography.
When cigarettes were determined to be harmful to the health of users, the government required a warning on the package indicating its dangers.
The next time you read or watch the financial media and someone is touting a stock or market sector or telling you how to "beat the markets", try to visualize this warning: Reading or watching this magazine or program may be harmful to your financial health.
The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein.
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These rags have been pumping out financial fluff for years.
What's new?
Did you ever watch CNBC when they have a crowd of commentators in the "boxes" all wanting to be heard. One starts with his agenda and then someone attacks him and then all hell breaks lose and they are all taking at once. What utter nonsense. If any of them has something worthwhile to say he/she is just drowned out by the others. Everyone, it appears, has an agenda. Oh yeah, don't you just love the never ending question of what do we invest in now? Everyone has an answer for that one too. Very few of those folks know what they are talking about, if any do.
Absolutely correct. There should be a congressional inquiry highlighting the links between the lying, misleading big name financial press and the large pools of predatory capital in effect served by it.
It is time for Congress to spotlight the psychological inducements that led to the sudden impovershment of millions of small investors during the October 2008 worldwide drop in financioal markets. The level of information manipulation in the financial sphere preceding the crash has been without equal, ever.
Market decisions, at least in theory - highly oversold by neo-liberal ideologues - were supposed to be based on access to reliable information. Where is the reliable market information? What led the media to play financial great con game? How can there be reliable investment in fianacial markets if the information is rotten? Some questions for legislators to ponder and fast.
I used to watch an entire newscast on Cable such as CNN all the way down to the finiancial analysis segment. Something funny happened on the way to Cable TV Nirvana. While many people were fooled, we were not fooled by a daily program across the networks of military analysts (mainly retired Generals) giving a play by play analysis of the illegal war. It was almost like announcers at a 15 round boxing match. We knew it was all fake after two days of viewing. The point is the financial segment seems so equally prepared and scripted with guests more geared towards entertainment and manipulating the public than a market based reality. Of course we have been saying for three years now that the Yale and Harvard business models are completely fake because it rests on the premise that, "our collective wisdom is the best and only way". We have since expanded to include our educational system, judicial system, and political system as completely fake. Hope fully Obama will wrestle control of these institutions from the Harvarders, Yalers and West Pointers and bring back the temerity of integrity to these systems. For now, my money is on the Huffington Post as my personal best news source for almost everything.
No kidding. I never understood the logic in listening to these people tell the world where to invest. Why would I put my money somewhere that these guys and their friends are probably already vested in. It would boost their earning and add to their wealth until they are ready to move on to the next investment. Unless that's the purpose. Make more money for the earlier investors and hope to get just get a little something for yourself if you're lucky.
For now the average working American is better off putting their money under the mattress, growing their own vegetables, and bartering with their friends and neighbors for the other necessities.
When banks that are bailouted are allowed to use that bailout to buy crude and store it, manipulating the market, none of us should be surprised by any other lies they may tell us.
I am old enough to remember when financial news amounted to Walter Cronkite's sixty-second blurb about the market's performance near the end of his newscast. And that's the way it was. Today, financial reporting is tantamount to listening to Al Michaels do a play-by-play on Sunday night football. Worse yet, when you realize after you have done your own homework how bloody wrong half these people are. Its the price we pay for living in a society where information access is getting less expensive yet we rely on these intermediaries to spoon feed us partial information and worthless Wall Street gossip mixed with unnecessary fear.
Alton E. Drew
www.altond
As a child many years ago I knew some stock brokers. They made a lot of money for themselves and a lot less for their customers.
Call me a cynic, but my problem with 'investing' in the stock market is that it has always seemed to me to be a rigged game. The top people trade inside info to make the big scores and they give the crumbs to the rest to assure the money keeps rolling in. I want to be able to invest in myself, not some scam. I want my government to invest in the future not in making a quick buck by selling out to corporations. Until I start seeing some of this I am NOT trusting anything they say
Financial ponzi scoundrels, sooth sayers, con-artists and bunco steerers bilking investors out of millions of their hard earned dollars = financial porography. Whatever happened to honesty? I guess that would be too old fashioned.
I think Frank should have called this stuff "financial Tobacco". Porn isn't normally hazardous to your health.
And we have a winner. Excellent idea.
Infomercials! They'll tell you how to get rich!
When I was a kid, I played a game called "Stockticker" with the neighbour kids. You bought "stock certificates" and then rolled the dice to see whether they would go up or down.
A lot of financial "experts" would have better track records just rolling dice.
Although RenoSage's chicken guts idea has merit too.
Let's extend the metaphor to include the entire fetish that is embraced regarding wealth. Conditioning has led to a widely held perception that "it's all good" where corporate wealth is concerned. So, how much $$$ is involved in corporate management compensation, stock options, severance packages, and other goodies that are handed out per annum? I don' t have a number, but I bet the numbers are staggering. A collectived fetishizing of making it big and cashing in on it -- THAT's the pornography that we've been titilated with and have stupidly participated in, while not quite understanding its implications.
And people wonder why our consumer-based economy is collapsing.
When it comes to investment: You cannot trust anyone.
Do your own research, make your own choices.
Sorry, there is no way to tell a charming shark, from a nerdy saint.
Professional Shark spend the entire careers figuring out how to fool you.
While you spend you life on family and careers.
You don't stand a chance.
That's Why we Americans have hired Experts via our government, to protect us from the sharks.
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