Criminalizing Bad Investment Advice

The Wall Street Journal (WSJ) recently published a story, Protecting Your Bucket, about financial radio talk show host Raymond Lucia being persecuted by the Securities and Exchange Commission (SEC) for giving bad investment advice. WSJ community contributor Mike Hogan comments on the story in this guest post. – Mark

The element that’s missing from this story or SEC allegations is the part where Lucia gets a commission or kickback from promoting a particular investment vehicle — well, like your average stockbroker does legally. He is promoting a money management methodology monetized by his books and management services.

So he likes non-traded real estate investment trusts (REITs). PIMCO’s Bill Gross likes bonds. He called T-bills wrong last year. So what?

Lucia used the wrong number for inflation? Then Greenspan and Bernacke should be in prison because no one has more fanciful and politicized econometric data for the past 40 years than federal government bureaus across the acronym spectrum. They started cooking the numbers to dampen their Cost of Living Adjustment (COLA) obligations for entitlement programs in the late ’70s and Katie bar the door. Hey, did you know that inflation is only 2% right now? Right. And unemployment fell to 8.2% last week. And the operator of the biggest Ponzi scheme ever created? The Social Security Administration.

If you want to wallow in malfeasance and plain old incompetence, pick a government bureau, any bureau. That used to be the appropriate object of Fourth Estate scrutiny. The $1 trillion a year “official” deficit for each of the past five years is really $5 trillion annually when the unfunded off-budget liabilities are included on a Generally Accepted Accounting Principles (GAAP) basis. Of course, without a federal budget for the past three years, they don’t really exist, do they?

Here’s a question for the SEC: Who stole more money from dear old Ms. Beyers’ pension fund and her kids and grandkids with a single swipe of the pen yesterday? Lucia or Bernacke?

[Note] Federal Reserve Chairman Ben Bernanke announced the prior day that he would print $40b each month to buy bonds backed by housing mortgages. – Mark

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