Wednesday, June 30, 2010

My expert opinion on experts.

From Blogs and Stories by Randall Lane:
In an era of epically wrong financial predictions, boisterous Jim Cramer's declaration that "Bear Stearns is not in trouble!" a week before its March 2008 collapse, rated among the most moronic, or at least the most infamous.
But it turns out that Cramer made one call far worse: He decided to make a stock-picking star out of a mumbling former Major League Baseball All-Star named Lenny Dykstra, giving him a high-profile column and ultimately an expensive "premium" newsletter on Cramer's site How did Dykstra return the favor? As I reveal in my book,
The Zeroes: My Misadventures in the Decade Wall Street Went Insane, Dykstra took money—$250,000 worth of secretly issued stock—in exchange for recommending that stock to subscribers. He also promised access to Cramer in exchange for the stock, which he apparently hid under his brother-in-law's name.
We love the experts. We love to hear them tell us what to do, which stocks to buy, which books to read and which sports teams to wager on. When things go wrong (as they often do) we like to have people to blame, and that's partly why we love experts.
I saw it during the recent World Cup soccer (er ... football) matches. The US team rode a wave of jingoism into a match with Ghana. People who don't watch soccer that much (most people) bought into the experts' opinion that the US team had a shot. As it turned out, they weren't quite good enough, and our patriotic hopes were dashed.
It happens with a lot of things that people don't pay much attention to until something big comes up, like the Stanley Cup final, the Kentucky Derby or the stock market. Mostly, it involves gambling or some money sport of some kind (like stock investing) and we want to know what to do with our money so that we'll have more money. That's where guys like Jim Cramer come in.
He boisterously proclaims that he knows something, and under that grand style that is distinctly American, he figures that if he yells loudly and has a TV show, people will believe him - and they do. If the stock goes up, it's partly because Cramer yelled about it and investors bought it up. That's part of the charm of the stock pickers.
But ask yourself, "why would someone want to share their knowledge to help me get rich, when they could just as easily do it themselves and be rich on their own?" The answer is, because there is more money in telling people how to become wealthy than there is in actually doing it for yourself. That's odd.
There are a ton of real estate investment programs that tout "secret" ways to turn ten dollars into ten million, or some such scam. Supposedly, you can be rich just like the people on the infomercial. Try it, and let me know how it went.
Mostly, we're all kind of dopey and we like to rely on others' opinions to make our decisions seem less like we're screwing up and more like someone else led us astray.
Here's a tip: Do it yourself. Read, learn and make your own decisions. You'll fail, just like the guys on TV, but when you succeed you'll be able to tell people how smart you are.
Just like the guys on TV.

1 comment:

Kcoz said...

You have touched on an important point here…for some reason the general public thinks that if a person is on TV telling them something, they feel that person must be important and their information must be true…or they would not be on the TV.