Welcome to the Twilight Zone - 3/22/13

In this week's edition:  Enter at your own risk! Is this email not displaying correctly? View it in your browser.

Welcome to the Twilight Zone When the DOW reached a new high recently, an investor asked if she should sell stock to capture the gains and wait for a better time to buy back into the market.  A famous television commentator's suggestion precipitated this question. I follow investing media, not because there is anything useful there, but because investors expect me to be at the ready to field questions about what they see. While the list of topics is broad, the list of questions generally is not.  1) Should I get out of my investments because of (insert prediction here); or 2) (Insert investment here) looks good, should I buy? Most people know what they've seen has already been incorporated by the market  and no one knows what's going to happen next.  But by the time an investor presents either question, he has already decided the idea to do something different is a good one - otherwise he wouldn't ask.   For example, no one has ever asked, "The market is tanking and things are scary, changing my allocation would be stupid, right?"  Even the least sophisticated investor understands selling low is a bad idea.  But when emotions are piqued we tend to disregard things intrinsically known, opting instead for trying to think our way out of reality. You've got to love the brain.  You can't go crazy without one. My job is not to convince the questioner the concept and source is wrong.  It is to make a reasonable argument enough doubt exists that what appears obvious…isn't.  It is "a strange intersection in a shadow land called, The Twilight Zone." Being honest, calling these difficult conversations Twilight Zone experiences is an exaggeration.  But labeling my experience observing financial media in this way is not.  It would, in fact, make for a particularly scary episode. To explain, I find financial media to be one long advertisement, where the actual commercials convey information more useful than the programming.  Most consumers are not aware that many of the "gurus" who appear on financial channels are not correspondents; they have paid boo-koo bucks to get a few seconds air time with their company banner prominently displayed behind them. Knowing that, the effort is obvious:  the appearance of being called on as an expert lends itself to credibility...which lends itself to capturing more clients.  Even more confounding is sometimes those who are correspondents are doing the same thing.  I frequently receive the following:  "If you have a $500,000 portfolio, you should download the latest report by Forbes columnist ___________." "This must-read report tells you where we think the stock market is headed and why - and provides analysis you can use in your portfolio right now." The website further touts: "In addition to our stock market outlook, we include our views on: What is likely to impact markets in 2013...and what isn't - Why inflation likely isn't a risk in 2013 - Why this bull market has room to run - Why 2013's gridlock is good for stocks" Conspicuously absent is an offer for a Palm Reading session. Oh well, it's still awfully compelling.  This isn't some obscure prognosticator, it's an actual writer for a leading financial magazine with an inside scoop…AND a crystal ball.  But before I gave this guy my money I thought a little due diligence was in order.  So I started snooting around to see how good he is at reading the future.  A few predictions from November of 2007:  "we definitely are in a New Era of above-average returns... I'm expecting another above-average year ahead, an easy one...buy stocks and be happy." Lawsuits ensued, including a retired couple that this guy's investment company converted from all bonds to all stocks in 2007 based on his predictions.  In that case the company was required to make amends of nearly $400,000 as apparently no consideration was given to the needs of the client when swapping out very low risk for the most risk available. And the company's response for being found guilty of "breaching its fiduciary duty?"  "…losing arbitration once every seven years is a record far better than any major competitor, which underscores the integrity of our firm." If I'm not mistaken, this super genius (VP in charge of corporate communications) said that being found guilty of screwing fewer people than other companies means you're trustworthy.   I brought up the Twilight Zone thing already…right? Don't get me wrong, I can't blame a guy for parlaying the credibility of being a Forbes columnist into a mega investment advisory firm with 25,000 clients and $42 billion under management…even if his crystal ball seems to be less than reliable and his firm's advice less than suitable at times.  After all, as long as you're making more money than you lose in legal disputes, you're still…as Charlie Sheen might say…WINNING! But this example is another revolving door in the mega-structure we know as high finance, where one position benefits the other and vice versa, whether or not it benefits the consumer.   The prospect it will, however, is a tonic that makes us feel better temporarily. Of course, when we wake up hung-over the next day we realize the tonic was mostly booze.  It helped us forget about our ills momentarily but now we are worse for the wear.  Unfortunately, some pay the entirety of their life savings for the bottle of snake oil advertised in and around what would seem reliable and reputable sources. Welcome to the Twilight Zone...of Investing. I welcome your questions and comments,   Marc Becker, AIF Managing Partner, Wiser Financial Coaching Columnist, The Advisor Sherpa  becker@wiserfinancial.com To read past articles and view past videos, visit: www.marcbecker.tv Sources for this article: http://www.advisorone.com/2011/07/08/fines-awards-slapped-on-jp-morgan-fisher-investmen http://www.bogleheads.org/forum/viewtopic.php?t=37820 http://www.lawyersandsettlements.com/lawsuit/fisher-investments-losses-kenneth.html#.UUjogByG2RQ http://www.investorlawyers.net/fisher-investments-client-wins-award-in-arbitration/ *paraphrased – see the first source link for the full comment