Why You Shouldn’t Trust Financial News

Two stories this week have rammed home our jaundiced view of media and politics.

Both stories involve multi-millionaires — one real, one fake. And both stories reinforce a sad truth: that the mainstream media and the political class don’t have your best interests at heart.

Two motives have driven the people in both of these tales. Those motives are Money Morning’s ‘kryptonite’: fear and favour.

You see, we report stories as we see them, with neither fear nor favour. And where we see people in positions of power trying to pull a swift one on you, we call it out…

Let’s look at the fake rich guy first, as his story is more amusing.

On the weekend, the New York magazine ran a story on a 17-year-old schoolboy from Queens named Mohammed Islam.

New York breathlessly reported that the kid was ‘basically a genius’. He started trading small-cap stocks at the age of nine. In the past eight years, through trading various financial markets — oil, gold and stocks — he’s amassed a whopping fortune. New York implied that Mohammed is worth more than US$72 million.

There’s only one problem with the story — none of it is true. It’s made up. Mohammed is just a cheeky teenager. With the help of his similarly cheeky mates, Mohammed managed to fool one of America’s better-regarded journals in a major way. He conned them into believing he could start with nothing and build an eight-figure bank account before his 18th birthday.

Anyone with even an elementary grasp of how investing works — or even just a half-decent bulldust detector — could have seen through this. Compound interest is a powerful thing. But it’s not powerful enough to get you from nowhere — call it US$500 — to US$72 million in just eight years. That is, unless your average annually compounding rate of return is almost 350%.

The world’s greatest investors struggle to consistently achieve annual investment returns of more than 10% to 20%. That should show you how laughable this story is.

Full credit to young Mohammed and his rascally mates for pulling off the hoax of the month. But this episode shows something important about financial advice…

Ignore the CUPOs

We at Money Morning are fully accredited investment advisers. I (Tim) have undergraduate degrees in finance and physics. I’ve studied with the Chartered Financial Analyst (CFA) Institute, and have become qualified to give financial advice in both Australia and the United Kingdom.

We don’t say that to toot our own horn. We say it to remind you that you should demand these kinds of credentials of anyone who would offer you financial advice.

The lines between financial advice, information, news and opinion are becoming increasingly blurry. That’s why you should demand real credentials before you respect the work of any financial pundit. You should consider most journalists ‘CUPOs’: charlatans until proven otherwise.

Unfortunately, bringing you clear, useful, actionable advice is the polar opposite of what drives the mainstream media. Fear drives them — fear of missing the scoop that will bring viewers to their platforms. For the most part, these hacks are unschooled in financial matters. That’s certainly true of the one who fell for Mohammed Islam’s story, but probably also of her bosses, who approved it.

That’s where we at Port Phillip Publishing differ. All our newsletters come from trained investment analysts. Collectively, we have spent decades in the financial markets. When we see a story where something doesn’t add up, we poke away at it. And when we find stocks where something’s not quite right, you can bet we don’t recommend them.

New York and its brethren live or die on advertising revenue. Meanwhile, advertisers bombard us with requests to appear in Money Morning, and we tell them all the same thing — ‘no way’.

The only way we get paid is if you read, appreciate and subscribe to our newsletters. So if we didn’t act in your best interests, we wouldn’t last long.

The last thing we would want is for you to lump us in with the kind of lazy, conflicted and uneducated reporters who publish stories like the US$72 million hoax. We’re better than that — and you should demand more than that.

You deserve better

We don’t have space to cover the second story we alluded to earlier today. More on that tomorrow.

But this week’s fiasco at New York proves a vital point about financial advice.

If you want to invest successfully, you have to ignore almost everything that comes out of the mainstream financial media. The bulk of its players are either untrained, uninformed or hopelessly conflicted.

You deserve better — and if you want to find out just how easy it is to get better advice, starting now, go here to find out more.

Regards,

Tim Dohrmann+
Editor, Money Morning

Join Money Morning on Google+


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