John Stewart, Helaine Olen, and Financial Advisory
Last week I turned on Comedy Central and saw an interview on The Daily Show with Helaine Olen, author of Pound Foolish, a book that examines the “Dark Side of the Personal Finance Industry.” While I haven’t had a chance to read the book, her interview left me with a few impressions, which I highlight below. You can watch the entire interview (3, 5 minute parts) using the links below.
Olen: “Net worth plunged 40% between 2007 and 2010.”
Response: Yes, that is true. However, the largest contribution to an individual’s net worth is called “home equity”. Looking at when home equity was at the peak, 2007, and comparing it to the rock bottom, 2010, isn’t really saying anything. All it does is highlight that there was a housing bubble…everyone knows this.
Olen: “Suzie Orman has her own…books and tapes.”
Response: So, you wrote a for-profit book that criticizes another women for writing a for-profit book…
Stewart: “If they [CNBC] mention a stock, it goes up.”
Olen: “But weeks later, it goes back down.”
Response: If any one of any prominence mentions a stock, the markets will react. Look at what happened with HLF over the past few months. That is less a reflection about financial advisors and more a result market inefficiencies and the possible effects of algo-trading.
Olen: “The best thing to do when he [Jim Cramer] mentions a stock is to short it.”
Response: Really? The best thing to do is a short a stock that will likely go up before it goes down, if it goes down at all. Hmm, I didn’t realize margin calls were no longer an issue…not to mention the possibility of unlimited liability…I guess you could always us a DERIVATIVE (foreshadowing below).
Olen: “We have 50% of the population saying they are living paycheck to paycheck. There’s a whole industry of people saying ‘Hey, you can’t manage your money.’”
Response: 99% of the population owns TVs, 85% own cellphones, 48.5% have cable. Given the average ratio of debt-to-income, and it being over 100%, I would say the issue here is personal fiscal responsibility. So yes, I would say most people can’t manage their money.
Stewart: “Don’t they then take that money [pension fund], treat it like a slush pool, and then bet on derivatives?”
Response: You are an idiot. Derivatives are used to hedge risk. Not owning them is a bad thing. If a pension fund didn’t allocate money for the purchase of put options then they wouldn’t be doing their job. If, based on your inference, you are talking about MBS/CMO, then the real issue there was with their credit rating…sorry S&P and Moody’s still love you guys.
This response only highlights the first video. Olen and Stewart exhibit a complete lack of financial literacy, and their babbling continues for another 12 minutes. I would recommend watching it, because at the end of the day it’s nice to be smarter than a disgruntled Smith College alumnus, haha.
Pound Foolish - Amazon
Interview Part 1
Interview Part 2
Interview Part 3
what a breath of fresh air. I hate liberals.
Only watched the first interview, but think that you miss their main point: that wages, salaries and earning a living isn't enough anymore for a large percentage of Americans, thus they get sucked into these mass media investing "scams" as a way to get by. I don't think either one claims to be financial gurus and they raise an interesting point about income stagnation.
Your points are correct though and Stewert mentioning derivatives the way he did was pretty dumb, but I think 95% of people probably think about CDS/CDO speculation when they hear derivatives since the financial crisis; just a common inference that is now made by laymen.
I absolutely agree. It might sound like I'm asking for public ridicule (oh, the "banker" who says main street can't manage money), but really. Think of all the people you know who make law school, got a MA in creative writing, etc.), you forfeit your right to complain. You made a (terrible) choice. You have the cognitive capability to be an electrician/medical technician/government employee, but you chose this path. You cannot convince me that you thought you would be making 6-figures with your MFA in Drama.
I am not even sure that this segment of the population follows financial gurus. Hell, even if they just bought shares of whatever the talking heads on CNBC pushed, they would at least be doing something. It might just be my peer group (people in their 20s), but a lot have given no thought to personal finance. I don't think they own any stocks whatsoever or monitor their credit history.
Wait, hold the phone there, you mean the MFA in Drama isn't as useful as I've been told by everyone sitting at Starbucks at 2:30pm? Damn. Guess I'll have to reopen these CFA books.
Damn you market economy for demanding that I have useful skills!
I have a note right here on my desk saying "Helaine Olen, 'Pound Foolish: Exposing the Dark Side of the Personal Finance Industry' - seems like a really stupid book, make fun of it on WSO".
Beat me to it! Bravo sir, bravo.
Do you guys understand why PWM gets so much shit now?
lot of idiocy in this interview. personal finance advice is what those 50% who live paycheck to paycheck need the most. most of that group doesnt have a clue about a 529 plan, they dont have 401k (with the free money company match) because they arent aware it exists and the last thing they have is any semblance of knowledge on the stock market and financial planning in general.
Wow, you guys are all butt-hurt over a book attacking retail financial advice? I have news for you - brokers are shady and frequently fleece their clientele. Brokers don't have to sell you what is in your best interest, only something that is suitable for you.
Suze Orman, Jim Cramer, etc are scumbags not because they make money off of books/financial advice/stock picks, but because they don't have any skin in the game. You think Cramer is actually buying those stocks for his personal portfolio? And don't bring me any of this "charitable trust" BS.
Brokers are shady? You mean they might recommend products that generate higher commissions? But car salesmen always recommend the best deal...
The average American is ignorant of personal finance. Before you sign your assets over to a broker, maybe pick up a personal finance magazine/book. Even a POS like Kiplinger's. One of the things they always recommend is a fee only advisor. This isn't a secret. It is like buying a car without doing any research whatsoever - worse, because your investment decisions ripple through the rest your life.
But this is a moot point. You can't fall victim to investment scams if you aren't saving money. Under-performing the market by 3 points is better than saving nothing. Doesn't the average American retire with ~60k in retirement accounts? That is terrible. Half the people on this board have more saved by 25. Even investing a miniscule amount in underperforming investments will get you to well over 60k if you start early and save consistently.
Now I like John Stewart and think he does a good job criticising both the right and left (mostly the right though) in politics. He serves as a good finger pointer to the political sphere that takes itself too seriously but too light on everything else (like morals).
It is a shame when he sells himself short with filler shows that are designed to rile up the viewers and appeal to their angry sentiments in the same way his criticises Fox News for doing. It's lazy journalism, if you can even call it that.
The concept of "Financial Literacy" is a recently created excuse to justify a "buyer beware" mentality when it comes to financial advice for retail clients. The financial publications that specialize in pedaling "financial literacy" (CNBC, Forbes, Barron's, etc) are funded primarily by institutions whose interests run counter to those of the retail client. When basic concepts such as creating a budget and tracking expenditures are discussed (which is rare), unrealistic return expectations are the rule. Someone let a fox into the hen house if you ask me.
And the whole point of Olen's book is that its kinda hard to save your way to a million bucks when you live pay check to pay check. If you do manage to save anything, an ill timed layoff, health problem or divorce is likely to destroy any meager portfolio you were able to cobble together.
Is this all highly unethical? Yes. Should it be illegal? No, but the government should stop perpetuating the problem by introducing convoluted regulations that end up creating such Frankenstein products. But that's a rant for another day.
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