THE BLOG

The Charade Continues at CNBC

05/01/2009 05:12 am ET | Updated May 25, 2011

Nothing has changed at CNBC.

An unrepentant Jim Cramer still spews nonsense masking as financial information of use to investors. The good news is that his pitiful interview with Jon Stewart, and his clownish antics, have made him less of a threat to investors.

Far more insidious are the well-dressed, well-educated and well-spoken "experts" who fill up CNBC's time slots and seek to enlighten us with their wisdom.

Last week, Steve Auth of Federated Investors was interviewed. Mr. Auth believes the market is "oversold." Among his recommendations is that investors should focus on stocks that offer dividends "against strong balance sheets."

Should you listen to Mr. Auth?

He certainly has impressive credentials. He is a graduate of Princeton with an M.B.A. from Harvard. He is the Chief Investment Officer for global equity and asset allocation products, and Senior Portfolio Manager for Federated Investors, Inc., which describes itself as providing "world class investment management." Federated has $407 billion of assets under management.

Surely, Mr. Auth can tell us how to invest.

Since Mr. Auth has special expertise in "asset allocation products", I reviewed the performance of Federated's Balanced Allocation Fund (BAFAX). This fund invests in four underlying Federated funds that invest primarily in U.S. and foreign equity and/or fixed income securities, making its selection reasonably representative of the investment management skill of Federated.

The results were not confidence-building.

According to Yahoo Finance, this fund has underperformed its benchmark index (the DJ Moderate Portfolio TR USD ) for the past 1- and 3-year periods. Over the past three years, it is ranked 591 out of 963 funds in its category.

Morningstar delivers the cruelest blow. It ranks the fund "below average."

Not exactly "world class investment management."

In his excellent book, The Big Investment Lie, Michael Edesess, a Ph.D mathematician, provides the following checklist of sales practices used by brokers and advisors to separate investors from their money:

  • Throw numbers around
  • Look respectable and earnest and sound sincere
  • Use technical jargon
  • Say they can help you get rich
  • Deal with objections through evasion
  • Appear to be very well informed
  • Have something new to offer
  • Use impenetrable language
  • Talk about "sophisticated technology"

Keep this list in mind the next time a broker or advisor pitches your business.

CNBC gives these self-styled experts a forum to reach millions of investors.

It's all a charade.

Don't fall for it.

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