Financial Advisors – Pez Dispensers but for Falsehoods
Executive Summary
- Financial Advisors and How They Lie to their Customers
- Using Corrupt Sources of Information versus proven Resources
Be careful about opening the mouth of a financial advisor, stock broker and so on. Unlike a Pez, that is not candy that is about to come out of their mouths.
Introduction
When I look back, it is in utter amazement at the number of false statements I have been subjected to by financial advisors and even friends. It is an important conclusion when one understands that almost no one, including the experts, understands economics or forecasting. Even the highest status Wall Street financial advisor is mostly useless because they work for institutions that follow the pack and are so focused on short-term gains that they can not see the forest for the trees. The greatest evidence for this is the most recent financial crisis where all the major Wall Street firms and many of banks went off the proverbial cliff due to short-term incentives.
Magazines such as Forbes and Fortune take so much advertising that their objectivity is severely compromised. So who to listen to? I have found several sources, which I have sometimes lauded in this blog, but which I have been surprisingly unable to get friends and acquaintances to read.
Using Corrupt Sources of Information
Why to people continue to gravitate to corrupt information sources long after they have been proven incorrect in their assertions? Need I remind anyone, Fortune awarded Enron, its Most Innovative Company in America Award 6 years in a row. Regardless of past performance, people continue to quote information from these sources to me. It is almost as if no one keeps track.
I have told people I know about the best sources for financial information, and they are free and easy to find on the internet.
They are:
- CEPR
- Dollars and Sense Magazine
- Michael Hudson
I don’t have to study very hard (although I did study the real estate bubble, but came to the same conclusion that CEPR came to but with more rigorous methods) and now forecasting is easy. That is long-term forecasting; I don’t believe anyone can say when a particular event is going to happen. However, if you look to the long term, then the specific event date is not all that important. I simply go with these sources, who have yet to be wrong. However, I am still asked what I think about this or that statement made by various corrupt sources such as BusinessWeek or Goldman Sachs.
But on most things, I ask “what have my sources written on the topic.” So most of the time I end up contradicting what BusinessWeek or Fortune or Mad Money say based upon the longer term rigorous work of my three sources.
Using Proven Sources
I don’t know what the reticence is to leverage proven resources. I stopped considering the opinion of television or people I know because it was bad for my finances. Most people have no idea what they are talking about when it comes to the economy and are primarily repeating things they heard from corrupt information sources. It is like a Pez dispenser when people talk about projections or investments, except instead a little piece of candy that comes out when they open their mouths, it is a small piece of excrement. The financial “professionals” are the absolute worst, primarily because they are on the take, but secondly, because most of them don’t understand economics. Yet, it does not come down to simply understanding economics. If you are an economist with three letters after your name that shows academic performance, however, if you work for Wall Street, your Ph.D. is now useless as a signal of quality because you have a very dark master.
How False Information is Repeated
However, friends and family are just as dangerous because they repeat false statements that they have read or seen from corrupt information sources. The financial illiteracy and propagandize ion are so powerful that I literally will not discuss investments with anyone except people I came close to primarily because I don’t want to listen to a restatement of information that has not been critically analyzed and originated from a corrupt source. Eradicating poor information sources substantially cuts down on my mental effort and allows me to allocate my time better.