Wednesday, August 18, 2010

Money Matters

Here is absolute proof that the individual investor will believe almost anything.  In fact, a good story usually sells a lot better than the truth.

Trust me.  I'm a CFP!
In the Dallas area, the weekends on AM talk radio are filled with infomercials for everything from vitamin supplements to home repair services to annuities and market timing.  And, the king of the financial product sales infomercials is a guy named Ken Moraif.  His "Money Matters" (isn't that an original name) show is on half a dozen AM stations every weekend.  It features goofy sound effects, lots of repeated simplistic "advice", an invitation to attend his seminar about every five minutes, and illegal endorsements from his clients.  Apparently, you can get away with blatantly breaking FINRA and SEC rules if you have a disclaimer before and after your radio show that says that it's not really advice and it's only for entertainment purposes.  It reminds me of the late night TV ads that promise that a pill will make you lose weight without exercise but the fine print is only flashed on the screen for about three seconds.

Mr. Moraif claims that he has a secret formula that allows him to tell his clients when to get in and when to get out of the stock market.  Oh, and his 20 some-odd years as a CFP qualify him to make that call.  Despite the fact that every academic study contradicts this method, it's a siren song to the unsophisticated.  And, it has made Ken a fortune.  Is it plausible?  Not even close.  Does he ever present any data to document the performance of this secret system?  Of course not.  But, the great unwashed, in search of return without risk (it doesn't exist) and lured by the promise of delicious chocolate chip cookies, keep heading to the seminars in droves.

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