Financial Advice Written by Morons

     I stayed away from this subject for a long time, but after a few hours shoveling some heavy shit (!) I think it's time to do a little debunking.  A long, successful career on Wall St. qualifies me to make several general observations on what passes for financial advice to the unaware blog reader. On Wall St. I advised people across the spectrum, from ordinary hard-working middle class people to hard working extremely rich people.  I found the sites I viewed among the most popular sites in the blogsphere.  Here are some very basic caveats:

• You get what you pay for.  Think for a minute about financial magazines and not blogs.  Let's say a magazine costs $5.00.  Hard and fast, the advice you receive from a magazine is worth $5.00.  Any schmuck with a fiver in his or her pocket can get the exact same advice as you, so how worthwhile is it?  For you and your unique (all investors are unique) financial condition this advice is valueless.  A magazine doesn't make money on the performance of your assets, it doesn't even make money on magazine sales. Magazines make money on advertisement sales.  To check this pearl of wisdom, pick any magazine and try to find any article that advises against your investing with one of it's advertisers.  Try it, but you won't find a one.

What about a blogsite, which is free? What is the value of it's advice.  That's right, nothing.  What's important to a blogger? Readership! This should send -up a warning flag.  To attract a reader, you need a good headline: be careful of headlines that make implied promises.  Bylines also attract readers. Think about this possibility, a single person has 2 blogs. One of this person's blogs says, "Hawk the house, and buy this!", while at the same time the same person in the other blog says, "Hawk the house, and short this (the exact same security).  It's inevitable that one of the blogs will be right.  I know this, we'd never know that one person was simultaneously pushing the exact opposite thing on two different sites.  Caveat emptor!  Once the blogger knows that the first site was right, he folds up the tent on blog number 2. and creates another one instead.  One of the blogs will always be right. A little manipulation of pen names and links, and it would be possible to fess-up to all winning blogs, and their near perfect track records.  Hard to believe that people fall for it?  Why do you think you see so many of them.  Once this track record is in place, people pay for subscriptions to password protected sites.  Then for the dishonest blogger it's PUMP, DUMP, and RUN.

• The "One day you'll be Rich, Too!"  Blogsite, often called "The How Do I Get Started Investing." Blog.  I read a few of these, and they seem well intended, not dishonest, in fact, exactly the opposite.  Nonetheless, these sites can also be accidentally dangerous.  Think again of the value of advice.  In my entire career, not once, did I ever find two unique investors for whom the same allocation or strategy was appropriate.  Is it possible that every patient of a doctor requires the same treatment.  Think of us for Pete's sake; how many of you have sued a surgeon for cutting first, and asking questions later.  That surgeon who treats all patients as if the were the same, instead of unique individuals,  each with a different set of symptoms, medical histories, preconditions, fears, ages; that surgeon is just like the blogger says take this percent and put it here, then that percent and put it there.  This advice fails to take into account the investors goals, risk tolerance, age, marital status, expenses, etc.  All investors are unique and require their own investment plans, Just like the patient I mentioned above.  This type of blog site is not a scam, but offers what it can't deliver: Financial solutions for you.

     This is always true: there's no free lunch, and there's no return without risk. Keep those 2 things in mind when planning the purchase of an island in the Caribbean.

Comments

[Steve "The Debt Reduction Man" B]

Wow some pretty powerful words there. You are right though you cant trust anything you just read out here in the blosphere or value a magazine worth 5 bucks to give you some type of advice that will make you a millionaire.