Surprise! Doom and Gloom Sells


Maybe you saw the alarming headline in the middle of the other stories on Yahoo! News, which told you that the U.S. dollar was about to collapse, as a result of H.R. 2847—or, sometimes, simply “the new currency law.” Write down this date, the frightening article said: July 1, 2014.

More recently, you might have seen/heard TV and radio advertisements or ubiquitous Internet warnings where Dr. Ron Paul urgently reveals “a real currency crisis” that will usher in the greatest economic meltdown this country has seen in 50 years—including civil unrest, pension fund collapses, the erosion of personal liberties, bank and brokerage closings, and mass rejection of the U.S. dollar in favor of “non-paper alternatives.”

In case you were wondering, the U.S. dollar did not collapse in July of last year, nor did it collapse in 2009, which is when Ron Paul began predicting doomsday. But if you watch the 54-minute Ron Paul infomercial, you will eventually be offered a “survival blueprint” published by Stansberry & Associates Investment Research—interestingly, the same company that told us that the U.S. currency would melt down last year. To avoid financial armageddon, you simply need to pay $49.50.

Who is Stansberry & Associates? The owner and publisher is Frank Porter Stansberry, who, among his credentials, has been prosecuted by the Securities & Exchange Commission for investment fraud, and fined $1.5 million for selling $1,000 reports with information that a panel of judges determined that he knew not to be true. Using the pseudonym “Jay McDaniel,” Stansberry offered a “Super Insider Tip” telling gullible investors that on May 14, 2002, there would be a major announcement which would instantly double their money. As it turned out, the uranium processing company that was being touted in the $1,000 report made no significant announcement on the date in question, and in fact investors testified that they lost 20-25% of their investment portfolio after purchasing the stock and options.

In the judge’s opinion, “The gravity of the harm in this case is not limited to the amount of money each purchaser spent for the Special Report. Approximately 1,217 investors bought the Special Report with the expectations, as promised, by the Super Insider Solicitation.” Stansberry and his publisher were enjoined from conducting any additional “deliberate fraud.” An investigative website also notes that he predicted the demise of AT&T, General Motors, the FNMA quasi-governmental guarantor of mortgages, Continental Airlines and… General Electric. One thing these predictions have in common with the prediction of the collapse of the dollar: they never happened. In 2011, Stansberry’s online infomercial predicted “The End of America,” and also that Germany would leave the European Union. To our knowledge, those things haven’t happened yet either.

In case you were wondering, H.R. 2847 is a provision that requires Americans living abroad to comply with tighter reporting requirements on their offshore income—and has very little to do with anything related to the dollar.

Predicting disaster is a reliable way to make money, because the human mind is wired to pay more attention to threats than to the more benign elements in our environment. In the future, you’ll probably see Stansberry predicting all sorts of other scary things, and probably a few more “can’t miss” investment opportunities. What you won’t see is any clear accounting of his track record.

Write down this date about the collapse of America, the extinction of the dollar, the demise of senior members of the Fortune 500, the total breakup of the European Union and a great chance to double your money in a day: Not on Porter Stansberry’s timetable.

Another outlet of bearishness, Casey Research, was recently acquired by Stansberry and Associates. Casey is also a flamboyant (and spammy) research firm, so I don’t expect the doom and gloom headlines to die down any time soon. These folks have been calling for the demise of the United States and the dollar for years, and people love to read fearful headlines. Most of these outfits have caused their readers to miss out on the last six years of stock market gains. Instead, they have led folks to invest in gold, gold mining stocks, commodities and other precious metals that have lost half or more of their value since 2011. You can save your time and safely ignore this trash designed to get you scared witless.

Just like in the media, fear sells, but if the dollar is doomed, we all have bigger problems to deal with. Instead of cash or gold, I’d rather have my home stocked with drinking water, flour, cans of tuna fish and the finest shot gun I can find if the dollar or market collapses. Oh and some fine beer or wine too, if that’s what you fancy.

While I personally believe that the market is way overdue for a 10% or more correction, the market doesn’t care what I believe.  Still, I don’t consider the situation as dire and desperate as these doom and gloomers describe it. The country’s economy is doing great, unemployment is the lowest it’s been and there are currently no signs of an impending recession. Nonetheless, while a crisis could develop anytime without notice somewhere around the world, our client portfolios are hedged and positioned defensively for whatever the market throws at us.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch.

Sources:

http://briandeer.com/vaxgen/stansberry-fraud.htm

http://thecrux.com/porter-stansberry-predicts-the-next-major-company-to-go-bust/

http://wealthymatters.com/2011/09/20/porter-stansberry/

http://thecrux.com/dyncontent/ron-paul-one-step-prepare/?cid=MKT033949&eid=MKT057529

http://www.snopes.com/politics/conspiracy/hr2847.asp

The MoneyGeek thanks guest writer Bob Veres for his contribution to this post

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