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Into The Lair of Financial Pornography

By: Investor Solutions

By: Investor Solutions, Inc.

Investors get inundated by so much B.S. (that doesn’t stand for Bachelor of Science) it’s not surprising that most continue to fail miserably. Case in point: I had the opportunity of attending a free “Power Investing” seminar sponsored by CNBC University recently. What I observed disgusted and dismayed me.

Unsuspecting investors continue to be lured by misguided attempts toward active (mis) management of equities. When, I ask myself, will they ever learn? Chances are ‘never’ as long as financial pornographers (like the aforementioned cable channel) continue to flood the airwaves with drivel. After all, stock trading and market timing can be sooooo sexy!

The reckless stock picking, market timing strategies being promoted by CNBC University have been thoroughly disproved for decades. They would have been laughed out of class had that lecture been given at any credible university or higher level finance course in the world!

Notwithstanding the dismal quality of the advice, it almost felt as if I was attending some sort of religious, life altering event. The audience perpetually mesmerized by the “preacher” (who, incidentally, had zero professional money management experience or formal financial training/education), hinged on every word he spewed. There they sat, aggressively taking notes, careful not to miss any of the lessons for reaching financial enlightenment that he delivered. During refreshment breaks, they lined up in hordes, like clusters of lemmings for the chance of some “one on one” redemption. The “preacher” was so convincing in his sermon that even I found myself daydreaming of firing my boss and achieving riches beyond my wildest dreams. And then I pinched myself back into reality.

The preacher enthralled his flock with phrases like:

  • “The amateur investor has tools that, once exploited, can help him achieve better performance than professional money managers, or even the market as a whole.”

Hum, I wonder what Warren Buffet might say about that?

  • “Our system will show you how to buy and sell a stock at the proper time.”

Makes me wonder- if the system is so good ‘why are you up here peddling it for pay instead of trading full time?

  • “How many of you like to make money with little effort or knowledge.”

Give me a break!

  • “Some investors who use our system at least six hours a week average 33% in annual returns”

Yeah ‘uh huh’.sure!

Here’s my favorite:

  • “Those who know when to get in and when to get out of the market will likely do well.”

WOW! ‘why didn’t I think of that?!

Did anyone else in the room have a clue??!! I’d look around to the rest of the “congregation” and see those poor souls salivating–dollar signs dancing in their eyes. Heck, given the ability to read minds, I’m sure I would have discovered that half the folks in room were drunk with delusional thoughts of quitting their jobs to trade stocks full time (the other half was already retired).

It took all my strength and will to stop from standing up and yelling at the top of my lungs, “People–get real!” Had everyone already forgotten about the day trading fiascos of recent years?

Did these people actually believe that they can consistently outsmart the market? Were they dumb enough to think that they had better insight into the markets than the multi billion dollar financial institutions that dominate “the game?” Folks, step back down to reality.

The fact is, there is an overwhelming amount of evidence that shows that there is little advantage in attempting to either time markets, or select individual equities. Such efforts instead, result in additional cost, additional risk, and lower returns over time. In addition, there is no evidence to suggest that past superior performance of a stock, fund or manager has any value in predicting the future performance of the stock, fund or manager.

At the end of the day, what the “preacher” was actually delivering was a load of bull. The whole purpose of the sermon was to proselytize about a failed money management strategy (market timing and stock picking). And oh, incidentally, if you want access to the sacred system -it will cost you. You’ll have to plunk down a big wad of cash to take the “advanced training class” ($3,500) to learn how to effectively execute the “mission” and then pay a monthly service charge ($50/month) for access to their nifty online tools.

CNBC University –shame on you for permeating such nonsense! What they are doing is a public disservice, using brand recognition to sway ignorant investors into a self defeating process. Perhaps CNBC’s ultimate goal, really, is to secure their own purpose in the world by creating loyal (blind) viewers who will continue to flock to their channel/website as a resource for market ‘noise’. After all, the more viewers they have the more advertising dollars they score. Sadly, individual investors who rely on this horribly flawed advice will be gravely disappointed and CNBC has a moral obligation to do better.

Investors do yourself a favor–save your money, save your time, and save your sanity. Rather than investing in such foolish rubbish, invest instead in a well designed, broadly diversified, global portfolio of low cost, tax efficient index funds instead. In the long run, you’ll be happy you did. Oh, and one last thing, tune yourself out of CNBC (and all of their financial pornography brethren).