Dr. Bill Clark - Christian or Charlatan?

Trust me, I'm a doctor!

Unfortunately,  the rogues gallery of unscrupulous "advisors" with radio shows extends far beyond our friend Ken Moraif.  Another one of the worst is Dr. Bill Clark.  According to the bio on his website, he did his "doctoral work" at Cornerstone University.  But, here's an interesting fact - Cornerstone University's website doesn't list any doctoral degrees.  And, I'm sure that a lot of unsuspecting people assume that his degree is in something that would actually qualify him to give investment advice - but, it's not.  It's in counseling and psychology.  Oh, and let's not forget divinity and music - not a lot of math required.

He mails out flyers with scary lies ("IRA's and 401K's potential 80% Tax Rate" - utter nonsense) that are designed to frighten conservative elderly people into listening to the sales pitch that he gives at local restaurants.  It turns out that he was suspended from the investment industry by NASD (now called FINRA) for what the regulator reports as "fraud and deceipt" (sic), "high pressure sales tactics" and "false and misleading sales tactics".  He also got slapped with a big fine.  This happened while he was working at Merrill Lynch.

Now, this charlatan runs his own firm where he hawks insurance products to vulnerable elderly people.  He even offers to come to your event and play his trumpet for you (followed by the sales pitch, of course).  Even more amazing, he chooses to put his radio show/infomercial on christian radio stations in order to gain some credibility from that association.  Stay away from this guy and his firm!

Money Matters with Ken Moraif - Wrong Again!

Ken Moraif has admitted that his market timing system doesn't always work.  Of course, that's not a big shock to anyone who actually understands capital market behavior.  In a video post, he explained why he was wrong in 2010.  But, of course, he also slid right into sales mode and explained why you should continue to believe in his market timing system - because it's going to protect you even though it's not perfect.

He blew it again in 2011!  He got his clients out on August 5 and told everyone to expect "financial Armageddon", which was an incredibly irresponsible prediction.  The S&P 500 started the year at 1257.64.  It closed on August 5 at 1199.38.  Getting out locked in a loss of about 4.6%.  Today, the S&P 500 closed at 1315.38.  An investor who simply held an S&P 500 index fund has had a return of about 5.3% since the beginning of 2011 and they haven't incurred trading costs, paid high fees, or realized taxable capital gains on a sale.  As far as I can tell, Ken still hasn't advised clients to get back in.  You see, that's part of the problem with this absurd idea - it requires two decisions and both are statistically unlikely to be correct.

Moraif charges high fees for a strategy that's dubious, at best - and then uses those fees to purchase airtime for his infomercials to drive more suckers to his seminars.  Don't be one of them!  All that garbage about being a CFP with many years of experience doesn't have any correlation whatsoever to being able to manage a portfolio.  In fact, the CFP curriculum has one very basic section on investing that doesn't qualify anyone to do anything.  It's just another way that charlatans like Moraif can attempt to build credibility with their target audience.



What do some actual experts have to say about a market timing strategy?

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two." - Warren Buffet

"If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what’s going to happen to the stock market." - Benjamin Graham, Author and "the father of securities analysis"

"Market-timing is bunk." - Pat Dorsey, Director of Morningstar Fund Analysis

"The market timer’s Hall of Fame is an empty room." - Jane Bryant Quinn, Author, Columnist - Newsweek

"Market timing is a poor substitute for a long-term investment plan." - Jonathan Clements, The Wall Street Journal

"No, I don’t believe in market timing. I’ve been around this business darn near a half-century, and I know I can’t do it successfully. In fact, I don’t even know anyone who knows anyone who has ever successfully timed the market over the long term." - John Bogle, Founder of The Vanguard Group

"Nobody but nobody, has consistently guessed the direction of the bond or stock market over any meaningful length of time." - John Markese, President, AAII Journal

"There is absolutely no evidence that anyone can time the market." - Bill Bernstein, Author

"Only liars manage to always be ‘out’ during bad times and ‘in’ during good times." - Bernard Baruch, Presidential Economic Advisor

"There is an overwhelming body of evidence to support the view that believing in the ability of market timers is the equivalent of believing astrologers can predict the future." - Larry Swedroe, Author

So, it's no surprise that this strategy doesn't work.  The only surprise is that people continue to fall for the sales pitch.  Maybe the cookies are laced with some sort of mind altering drug.

Enter the Dragon (Money Matters with Ken Moraif)

Sell signal?

One of Ken Moraif's clients (or former clients) sent me an email that was sent out by a member of his gang named (no, I did not make this up!) Eli Dragon. As hilarious as that is, when you check him out on the SEC's database, he also used the name "Butch Dragon" at some point. That, in itself, is more than enough to make me question his judgement.

Related?

And, speaking of judgement, the email reveals some interesting information about the portfolio management process at Money Matters with Ken Moraif (we'll call it MMWKM from now on so that I don't have to type it and you don't have to read it). Market timing is an idiotic way to manage client accounts, but there are degrees of idiotic. In my position, I am approached by money managers constantly and they are all touting their track records. I've had the opportunity to review dozens of real and back tested market timing and tactical asset allocation strategies. They invariably have serious flaws, but one thing that the professionals attempting this type of scheme do is follow a system on a consistent basis. Eli or Butch or whatever his name is, states in the email that the market is approaching the "sell signal", but that "this is not cast in stone and mitigating circumstances may dictate a different course of action". In other words, it's a total guess as to when they decide to buy or sell! This is astounding.

I cannot imagine what they must say in seminars to make people think that it's a good idea to invest with them. Those cookies must really be good!

Blue Horseshoe loves Kenneth Alfred Moraif

I take back what I said about the SEC not listening.  Kenneth Alfred Moraif (yes, the Ken Moraif of Money Matters with Ken Moraif on the radio) resigned from Cambridge Investment Research, Inc. because the firm received a deficiency letter from the regulators that outlined Mr. Moraif's statements and advertising that were inconsistent with both FINRA and SEC rules and regulations.  What frequently happens in situations like this is the firm allows the individual to resign voluntarily before they have to terminate them.  That may or may not be the case with Moraif.

It's about time!  You can visit the SEC or FINRA website and enter his name if  you'd like to read the report.  There is also some ugliness in there about a client alleging that he changed some answers on the client's risk tolerance on an application. 

Baking cookies just for you!

This, in addition to the overall cheesiness of his show and advertising material should be a good reason to avoid this guy and  his firm.  Add to that the fact the he fancies himself an expert market timer and almost anyone with any real knowledge of capital market behavior would tell you to run from him. 

Sorry about that, Kenny Boy!  Hey, at least you still have that brilliant white smile in your pictures and those cookies ("...we will have our now WORLD FAMOUS oatmeal raisin and chocolate chunk (YES, CHUNK!!) cookies waiting for you.  We bake them fresh right before the seminar so get there early and they will still be warm, right out of the oven.  They will melt in your mouth and the cookie smell will envelop you and take you to cookie heaven!") to use to lure people to your seminars. 

I wonder if the SEC would consider that to be false and misleading.  Has anyone really gone to cookie heaven, Ken?  Or, is that sort of a mythical place like the hall of fame for market timers?

Madoff Behind Bars

I watched the new CNBC special on Bernie Madoff last night.  Make no mistake - he's a criminal and he probably deserves a harsher punishment than the cushy federal prison where he's currently incarcerated.  But, what amazed me the most was the incredible naivete of the investors that were ripped off by his Ponzi scheme.

Your broker's recommendation

When did anyone ever think that a 1% per month return with virtually no volatility was a realistic possibility in the real world of capital market behavior?  It isn't.  It never was.  It never will be.  What was absolutely amazing to me was watching a woman who had been a stock broker tell how she and her family (who invested with Madoff at her suggestion) lost everything.  Don't get me wrong - I'm sorry that it happened to them.  But, she should have known better! 

If Madoff and company had tried to convince me or my firm that they could deliver this kind of return without volatility, we would have known in an instant that it was a fraud.  How could someone with many years of experience in the brokerage industry not see that?  I'll tell you how.  They don't have a clue about how capital markets really work.  They are product pushing salesmen (and women).  They know so little that they can't even protect themselves.  Do you trust their advice?  Don't.

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.

Which president had this to say about taxes?

Hint - it wasn't me!

The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system; and this administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes...

I am not talking about a "quickie" or a temporary tax cut, which would be more appropriate if a recession were imminent. Nor am I talking about giving the economy a mere shot in the arm, to ease some temporary complaint. I am talking about the accumulated evidence… that our present tax system… exerts too heavy a drag on growth in peace time; that it siphons out of the private economy too large a share of personal and business purchasing power; that it reduces the financial incentives for personal effort, investment, and risk-taking.

In short, to increase demand and lift the economy, the Federal Government's most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures. Corporate tax rates must also be cut to increase incentives and the availability of investment capital.

For all these reasons, next year's tax bill should reduce personal as well as corporate income taxes, for those in the lower brackets, who are certain to spend their additional take-home pay, and for those in the middle and upper brackets, who can thereby be encouraged to undertake additional efforts and enabled to invest more capital.

And I am confident that the enactment of the right bill next year will in due course increase our gross national product by several times the amount of taxes actually cut. Profit margins will be improved and both the incentive to invest and the supply of internal funds for investment will be increased. There will be new interest in taking risks, in increasing productivity, in creating new jobs and new products for long-term economic growth.

No, it wasn't Ronald Reagan.  But, that was a good guess.  It was John F. Kennedy - in his 1962 address to the Economic Club of New York.  Today, he would be vehemently opposed to the policies of the current administration and the democratic "leadership".