“Did you hear about the NATO plane downed by the Russians? No! Markets are a mess. Everyone is selling or, at least, trying to, if their broker is up and running!” The speaker of these lines (a young professional woman) in an ad CNBC runs for Interactive Brokers goes on to ask her dinner date to excuse her, as she wants to “put in some hedging trades” via her smartphone. This is probably not that smart for two reasons: 1) As US trading is closed for the day (which is pointed out in the ad), liquidity in the market place to put on those hedges is probably limited and, 2) the news has already increased the cost of hedging that she desires to accomplish. Anyway, she goes on to boast to her date that her IBKR account allows her access to trade 24/7, all around the world. Oh my!
NOT GOOD >>>Sell everything
Promoting Bad Behavior
Not only do the folks at CNBC provide their viewers and listeners with a plethora of less-than-stellar investment advice, but they willingly take on sponsors that incite bad investor behavior (and, as a consequence, poor investment results). Obviously, this idea of trading on news (and rumors) and being able to trade on the fly is quite appealing to the uninitiated. But, much like the young woman in the ad, much, if there is any advantage in trading a news item, is gone seconds after the news breaks. Trading into the aftermath of a news event is an idiot’s game. It is something serious, successful investors simply do not do.
More Bad behavior from Philip N. Diehl and CNBC
Who is Philip Diehl and why should he and his company, U.S. Money Reserve, be, on an unregulated basis, allowed access to the financial media and the general divesting public?
Philip Diehl is the 35th director of the U.S. Mint (1994-2000). Subsequent to his stint at the Mint, after a few intermediate stops, he hooked up with gold broker, U.S. Money Reserve, Inc. As a former Mint director, his pronouncements and name add credibility to this dealer, especially for the uninitiated. After reviewing their marketing videos and web presentations, it is clear to me that they are playing on the emotions of unsophisticated investors to sell a product, namely gold, that has been a terrible investment for decades with the exceptation of the period between 1973 and 1980 (when it ran from $42.50/0z. to $850/0z.) and 2008 to 2011 when (after 28 years of trading between $400 and $600/oz.) it jumped to a new all-time closing high of 19 of $1953.60/oz. in August 2011. Since then, it has been a less-than-suitable investment for those looking for stability and preservation of capital. It closed Friday May 13 at $1273.07/oz., down 35% from its August 2011 peak. Meanwhile the S&P 500, having closed at 1218.89 August 22, 2011, closed last Friday at 2046.60, up 82% since gold’s peak (gold price history).
Yet, their advertising continues to portray gold as a ‘safe haven’, secure investment for troubled, uncertain times. Here are some quotes from Diehl’s president’s message on U.S.MR’s website:
“While serving as 35th Director of the U.S. Mint, I came to appreciate how essential precious metals are to this country and to those who chose to protect their hard-earned wealth with physical U.S. government-issued gold, silver and platinum.”
“Precious metals have been a store of wealth-worth for centuries and have consistently been a safe haven in the face of economic instability.”
Since 1980, these statements could not have been further from the truth. As of last Friday’s close, gold has returned a grand total of 50%. Astonishingly, it is up $424 per ounce from its 1980 high of $850, while the Dow Jones Industrials are up more than 17 times before dividends. Is that what Diehl means, in quote number one where he said “… protect their hard-earned wealth … “ (from increasing)?
Five questions:
How can Diehl and his cronies at U.S.MR make the assertions in the above quotes and in their advertising?
How can CNBC air this material when these contradictory facts are easily available to them?
Why is there no disclaimer?
Why aren’t these guys and their claims regulated like the securities industry?
Does CNBC incite bad investor behavior?
The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions. These are not meant to be construed as recommendations to BUY or SELL. All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.
Bill,
This is the most helpful information and perspective !
Thank you for your work!
Voyteck
Bill,
You are revealing that the emperor has no clothes. I have marveled at the manner Phillip Diehl proclaims with overwhelming deadly seriousness of the need for us to buy his gold. He is a man clearly cashing in on his past job title.
Geo
You are absolutely correct. This is disgusting behavior, totally dangerous to gullible consumers. Again,it is apparently unregulated and CNBC has no problem airing it. Thanks for your comment.
At least it’s not as ridiculous as the “need to go place some hedging trades” commercial AFTER SH-T has hit the fan (by far the WORST TIME to place such trades) for Interactive Brokers that they run on a regular basis. YUCK!!!
Alan, you may be right. In the final Analysis both commercials play on the heartstrings of the unsophisticated. The reason I place the gold commercial on a higher pedestal is due to the fact that I spent 42 years in the investment business. I saw the price of gold go from $42 an ounce in the early 70s to $850 an ounce by the end of the decade. Then it took 25 years (an investing lifetime) for The price of gold to penetrate that level and head to a new all-time-high, A level where I am sure many of the uninitiated piled into the commodity again. For these guys to represent gold as a safe sound investment, in my mind, is reprehensible. During the same period of time Gold was going from 800 to $1900 an ounce, the Dow Jones industrial average went from 750 to 18,000, paying a lot of dividends on the way. There was absolutely no explanation of the risk involved in this investment or the total lack of performance in the past four decades. Who knows, maybe this is about to change. My view of gold is that it is a flight to safety trade. It may also be a good play if inflation really gets heated up. Then again, that would be good for stocks and earnings. Because with inflation, corporations will get pricing. Pricing has been missing over the past 10 to 15 years due to very moderate inflation and globalization. Regardless, I think the gold vendors should be regulated. Thanks for your comment.