This WSJ Advice Will Clean Out Your Bank Account

Writing a column is a privilege.  It is especially a privilege when it is a column in a distinguished publication like The Wall Street Journal.  As such, it should be treated with respect.  And more important, its readers should be treated with respect.

But all too often these days, readers are treated with contempt by the mainstream media who think it understands how the world should work despite abundant evidence that government policies are abject failures.  This is particularly true in the economic realm where financial journalists praise central bankers for saving the world during the 2008 financial crisis without recognizing that their reckless easy money policies created the crisis in the first place and persisted long after the crisis passed.

It is extremely frustrating to see financial journalists, who with few exceptions never managed money themselves and are therefore unqualified to give investment advice to others, pontificate on markets that they do not understand.  Their advice is leading too many people to make bad decisions that is going to cost them their savings and their sanity before the current cycle is done.

It is a disgrace that a publication like The Wall Street Journal publishes such intellectually deficient content…

One of the journalists working overtime to provide terrible advice is The Wall Street Journal‘s Jason Zweig.  Mr. Zweig writes a column with the title “The Intelligent Investor” yet demonstrates an ignorance of investment fundamentals and a disdain for investors that is alarming.  I don’t make that criticism lightly; I’ve successfully managed billions of dollars over the last three decades for some of the largest institutions and toughest SOBs in the world. I’ve been dressed down by the best when I made mistakes, but I’ve stood up to the test more times than I can count.  So forgive me if I don’t suffer fools easily, especially those that talk down to others when they demonstrate that they have no idea what they are talking about.  I’m sick and tired listening to the nonsense being foisted on the investing public by the mainstream financial press. Almost every word Mr. Zweig writes is wrong.  There may be better ways of losing money than listening to him, but I am currently unaware of any.

This Columnist Has Absolutely No Idea How Bonds Work

Mr. Zweig has been working overtime to dish out some of the worst investment advice I’ve seen in my more than 30 years in the securities business.  A year ago he called gold a “pet rock” and warned investors against investing in it; since then, gold has risen by 17.8 % while gold mining shares have skyrocketed by 133%.   Mr. Zweig was feeling very proud of himself when he was effectively calling those of us who understand why gold should be part of everyone’s portfolio (who includes not only me but investment giants Ray Dalio, Paul Singer and others) idiots and typed the words “p-e-t- r-o-c-k” into his little computer, but what he was really doing was demonstrating his abject ignorance of monetary policy and how the world works.  Gold is not rising because it has any inherent value; it is rising because it is the anti-fiat currency and acts as a psychological hedge against the risk of both inflation and deflation. I anticipate that it will reach $4,000 or $5,000 over the next decade or two, so it’s important to get in now. You can get my detailed gold recommendations – dealers, miners and ETFs – here.

He followed that bad call, however, with an even worse one last weekend that also exhibited a stunning ignorance of monetary policy and basic economics. In a column entitled “Bonds Aren’t as Awful As Some May Believe,” Mr. Zweig made the case that bonds currently returning nothing are a good investment.

As anyone with a functioning cerebellum understands, bonds are actually worse than they seem.  Mr. Zweig argued that what he incorrectly calculates as today’s 50 basis point real (i.e. inflation-adjusted) return on a 10-year Treasury bond is attractive because it is higher than the negative real return on the same bond in 2011.  Unfortunately, his numbers are wrong.  He is accepting at face value bogus government inflation figures that grossly understate the actual rate of inflation, which is not 1% but much higher.

In fact, the real (i.e. inflation adjusted) return on 10-year Treasuries has been negative (and not slightly negative but sharply negative, i.e., in the negative mid-single digits at least) since the financial crisis).  He writes, “don’t let anybody tell you the return on bonds is so much lower than in the past that they aren’t worth owning at all anymore.”  Well, I am telling you exactly that – 10 year Treasury bonds are certificates of confiscation and only a fool would lend money to the U.S. government for 10 years to earn a nominal return of 1.5% and a negative real return.  Mr. Zweig is that fool.

Instead of bonds, I recommend that investors store their money in my favorite liquid, virtually risk-free security – 1- to 3-month Treasury bills. You can get all the details here.

Mr. Zweig’s bad advice is, unfortunately, not an isolated incident of what passes for consensus thinking in the mainstream financial press. Turn on CNBC or Bloomberg Television or read the news section of The Wall Street Journal or The New York Times on any given day and you will be provided with a road map on how to lose money.  Believe me, I will get a lot of grief for writing a column like this since it’s not polite to criticize other financial writers who are just trying to make a living.  But if somebody doesn’t tell you the truth, you are going to get your clocks cleaned and your bank accounts emptied out. I couldn’t live with myself if I kept my mouth shut.

Fortunately there is a small handful of sources that are worth reading. They have real-world financial experience and are independent and incentivized to give their readers a clear picture of the world and the opportunities and dangers that are forming. Sure Money is one, as I hope you’ve already found. I also recommend groups like Money Map Press (my publisher), Real Vision TV, Zero Hedge, Credit Risk Monitor, and people like Doug Kass, David Rosenberg, Mark Yusko, and John Mauldin.




27 Responses to “This WSJ Advice Will Clean Out Your Bank Account”

  1. Yup. Yup. Lots of bogus stuff out there. And everyone I know has some engagement in the “black economy” of barter, all-cash-no paperwork, etc. so I conclude that the government has no idea what is actually going on…..the statistics are BS on steroids….most especially the unemployment rate and the inflation rate

  2. Robert Pacione

    HI Michael! I thoroughly appreciate your heads up and awareness to the misleading articles some post for there own narcissistic tendencies to get through there day. I am very new to investing in the markets and have not had a great start to the year. I must say. Being on the outside of the financial pros like yourself and other advisors of the world I have subscribed to for reading material mostly. Money Map and crew is the only one I have invested some small monies to absorb true knowledge of a truly crooked business. Your team I have realized is as honest as they come. From yourself to Bill to Kent and Keith. Truth be told. No matter how surprises rise from recommendactions. I have to wonder at times. What real truth is. As those individuals who are pure at heart and live for there work over look there own algorithum at times. Forgetting or unaware of a track record when first acknowledging a recommendation. As I take note to the timing of the recommendation. And skillfully notice that sometimes it’s way to early to invest. Even though the recommendation is great on paper. Bill is the perfect example. Every time a recommendation comes up to invest in his brilliant find. The stock seems to plummet. Trov was a perfect example to my point. Algorithums are everywhere. Even through life as most cannot see these patterns evolve for the individual and through themselves. Simply cause of that advisor can afford to wait or accept knowing what really is a truth of the stock. Regardless if one may say they have no royalties coming to them from the recommendation. Wall Street seems to pick up on the volume and somehow manipulate the popular stock at hand and force investors to jump out when half of there money is gone. (Crooked but is legit through manipulated choice) Which they want and pray on. I read this all the time with investors as small as I am compared to some or 1 percent. I guess my point is. I’m saddened by the scams by journalists and so called pros from other firms. As to me I have learned in a short period of time. Timing is everything but the knowledge of one’s personal algorithum is more important before taking the risk in such a troubling time of desprecy in a volatile society grasping at straws and nieve to the fact there choices are made through a desperate mind frame. Wall Street is as crooked as they come but it’s those who are fed behind closed doors who are worse. As they are just desperate for that rank of recognizition. I’ll send them chapstick for all the butt kissing they do as fools.

    P.S. – I hope to one day be able to afford the info you guys hold. I am very impressed with your awareness and the big hearts you carry for your subscribers. Keep up the good work.

  3. Mike, I have found your commentaries to be “spot on,” but I am confused about the 10 year vs the 1-3 month T-Bills. Won’t the T-Bills hit negative territory before the 10 year? Checking German Bunds, the 2 year is at -0.63, the 5 year is -0.49, the 10 year is zero, and the 30 year is 0.54. Where do we park our money when UST Bills hit negative territory? I’m not sure where money market will be then, of course it is not as safe. It seems 20 & 30 year would still be positive, yet….., well “safe.” Thanks.

  4. Anyone without a functioning cerebellum will fall down a lot but may still be able to invest. The cerebellum is the part under the main braun (cerebrum) that controls coordination and balance.
    Why is selling bad financial advice not like selling bald tires (except that one is a little more obvious)? These people deserve to be made fun of.
    I enjoy your column.

  5. Thanks for telling it like it is Mr. L.

    BTW, that was a most excellent interview with you (by Grant Williams) on Real Vision TV. Really really good.

    It’s a paid service, so I don’t want people to waste time trying to find it on you tube. But for those interested, the service is modestly priced for incredible value received, I must say.

  6. I agree with you in principle. However with the fed ready to go negative as well as print infinite money, perhaps treasuries will rally. I think the fed will finally have to admit the economy is not what the manipulated stats are telling you it is. I certainly don’t envy the task at hand for the next President, they will have to deal with a fed induced collapse.

  7. @ Gary K It’s true that 1-3 month treasuries yield next to nothing compared to the 10 year, but the 10 year is much more risky. If rates start to climb, a significant portion of your capital will be at risk. There is essentially no interest rate risk with very short maturity debt.

    @ Michael L What do you think of OUNZ as compared to GLD? No one ever seems to analyze its merits/demerits.

  8. Great article. Michael Lewitt is just a great person for his honest views. Many MSM reporters and columnists will swim in their self created filth and lies and prove to the world they are worthless time and time again. Best wishes to Michael Lewitt always.

  9. “Gold is not rising because it has any inherent value; it is rising because it is the anti-fiat currency and acts as a psychological hedge against the risk of both inflation and deflation”.
    Gold rises and it’s an anti-fiat currency precisely because has intrinsic value.

  10. One way to figure inflation is to simply look at where prices have gone on the stuff everybody buys every day. Since Obama took office deli meats have doubled in price. Thats not 2% inflation I can tell you that.

  11. Porter Stansberry (love him or hate him) just wrote an excellent 5 part series on corporate bonds in his daily Stansberry Digest. His points are that there’s a bubble in bonds and they are going to crash badly, especially junk bonds, and that when they do, there will be money to be made in such bonds. He is looking for short-term bonds (maturities less than 4 years out) from companies that appear to have the cash flow to pay when they come due. This series is among the best he has written and well worth the cost of a subscription to his advisory which is, I believe, well under $100 for the first year.

  12. but i would say NOT until a big currency event and inflation fro falling $$

    To summarize here, if you are going to risk negative real returns, don’t expose yourself to bigger losses in longer bonds (much) if rates go up or explode. Richards also reccos TIPS but I would say NOT until after a big currency event and inflation from falling $$

  13. previous partial reply referred to buying TIPS later on..for now, the consensus is that even a slight neg. return on T-bills is preferable to hardly anything in longer bonds, because rising rates destroy principal with no yield cushion hardly

  14. Of course M. L means that they don’t have a cerebrum, but a small one at that and cerebellum is just what it says: A small brain, so forget about balance and muscle control, Michael Lewitt is incredibly gifted with a big cerebrum.

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