Most Financial Journalists Don't Know Much about the Topic They Write On

I don't put a lot of stock in most of the columns penned by Robert Kiyosaki, but in one of his latest pieces he makes a comment I can buy into 100%. It deals with his opinion that most financial journalists, though they write about money every day, don't know a whole lot on the subject. His thoughts:

The problem with much of the financial news in print and on the web, radio, and television is that it comes from journalists who may not be investors. When I listen to most journalists whine and cry about the subprime mess, the slowdown in the economy, and the volatile stock market, I can all but tell that they're not really investors. None of these events really has much impact on professional investors, who follow market trends and are familiar with the underlying fundamentals of the assets they investing in.

Ok, I'll give you the fact that Kiyosaki has some "out there" ideas when it comes to investing, so it's reasonable to assume that he may not think a journalist is knowledgeable but perhaps they are. But I need to side with him on this one. I read so much stuff from financial journalists that makes me wonder just how these people can earn a living writing about something they know nothing about. And even the ones that do know something often leave clues that lead me to believe that they don't really follow the advice they give.

Here's what I'd like to see: A list of all the financial journalists, TV personalities, authors, radio hosts, and so on -- giving both their names and their net worths (or at least something like "in the top 10% of net worths in America.")

My bet is that we'd all be surprised at how little these people really know about managing (and keeping) money. And even the ones that do know something most likely don't apply what they know.

Personally, put much more credibility into people I know have done well themselves and tell me how they did it. After all, they've been there and know what they're talking about. Sure, there's a place for "I'm working my way up the net worth ladder and I'm taking you with me" sort of writer, but it seems like most financial journalists write like they're experts but really know very little about managing money (I'm picking this up from the small clues they do leave in their writing since none of them talk about their net worths to any degree.)

What do you think? Is this a fair point-of-view on my part or am I just feeling cranky today? ;-)

Comments

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I agree on all points.

[Wil]

I think you have a pretty fair grasp...,

I think some of the problem is that they all get their information from the same sources. The other part is that they really want to be authorities..., something about serving two masters comes to mind.

[Toby]

My first reaction to reading RK's quote was, "He's one to talk..." The man is a fraud. I wouldn't waste time even reading the drivel he writes (in fact, I don't).

This is just typical RK. Condescending to those who aren't as smart, risk taking, or entrepreneurial as he is. Consider that he doesn't really know any more than the writer's he's putting down. After all, there is literally no documented proof that the man has ever made *any* of the real estate or other investments that he's discussed in his books. As far as anyone can tell, he made his money selling RDPD. So what gives him the right to sling mud?

His claim that none of the latest economic happenings has much impact on professional investors is ludicrous! Professionals, perhaps, know how to see a little farther down the road and position themselves to either profit from or limit their downside. But to say they are unaffected is stupid. Of course they are affected! They have to take all this into account when making their decisions. Some will be right and some will be wrong.

As far as listening to the advice of financial writers that are rich versus those that are poor. I don't know if that is such a great litmus test. RK is a glowing example of a rich guy who writes and says the most idiotic things.

Jim Cramer is another one. The guy made millions running a hedge fund. I don't know if you've ever heard Jim discuss his hedge fund operations or read any books on hedge funds in general. They do not operate at risk levels that would be appropriate for a private investor. While Jim is a smart guy and has some good ideas, they are not earth-shattering (Do your research before buying stocks, etc). While the overall message is good, his individual stock picks tend to be more monkey with a dart board (I believe there is at least one site that tracks his stock picks).

Finally, Suze Orman. She's got $25 million government bonds and whatnot. Yet there she doling out investment advice (among other things).

So does net worth really have that much to do with it?

[Matt]

A lot of stuff that RK says is meant to get a rise out of people but in reality he has accomplished a great deal with is methods. I'm not saying I agree with everything his says but at least he speaks from some success (even if his books are his only success). I find a lot of business writers to be a lot like chicken little screaming that the sky is falling. The economic meltdown is a pain to a great many people (most of those people who haven't made an effort to investigate their investments or purchases).

Good post

[neumes]

I hope your viewpoint is shared by others or else I will be a very lonely blogger.

[GG]

Personally, this is one of the big draws of PF blogging. Most of the authors post their investments transparently. However, most of us don't use our real names... so it's still different.

As for journalists, I think you make a valid point. Journalists are taught to write from sources, not necessarily from professional experience. I wonder how many of them put their money where their mouths are.

[L]

I happen to know some media folks, including one who covers financial news for a major newspaper. The paper he works for has a rather stringent ethics policy ... outside of his retirement funds, he is restricted as to the kinds of outside investments he can make. So yeah, it might be difficult to put your $$$ where your mouth is if you can't put your $$ much of anywhere.

[Early Retirement Extreme]

Methinks you're being cranky :) .. One would not expert sports journalists to be great athletes either. Financial journalists try to make a story of what they can. Often that is single events and technical indicators which are then tied together in some pseudo-logical fashion e.g. the market when up 300 points on news about blabla... just think of it as entertainment like sports.. I mean, that's what CNBC is, right?

[aaktx]

I think the big-name financial journalists are pretty wealthy from the sales of books, cds, and other stuff they may peddle. So most of their money would be tied up in treasuries and munis earning a low percentage off a big sum. I think most financial journalism is for entertainment value(ESPN, sports journalism). They will unlikely be able to sway you or me from believing that dollar-cost averaging into index funds over a long term horizon is a bad idea.

[bp]

Journalism doesn't pay very well, and you get what you pay for.

As far as kiyosaki goes, re-read the article again, I would bet he made up the reporter just like he made up rich dad, its much easier to get quotes that way.

"He wasn't the brightest reporter, since he had trouble with the idea of investing for both cash flow and capital gains. After about an hour of explanation, he finally began to understand that I'm not just a real estate investor -- I'm someone who invests for capital gains at a great price, or cash flow at a great price, regardless of the asset class."

Come on, do you really think any adult, let alone a financial reporter, would need an *hour* to understand Kiyosaki "invests for capital gains at a great price".

"The stock market?" he stammered. "Stocks are crashing. Why are you in the stock market? Besides, I thought you were a real estate investor?"

Come on, do you really think a *financial* reporter would not understand why you would invest in the stock market after a crash? Do you really think that a *financial* reporter would be surprised that a multimillionaire whose net worth is claimed to be around 50 million (http://www.thestreet.com/funds/meetthestreet/10006507.html) is invested in th stock market, even if he is a "Real Estate" Mogul? On the other hand it is reasonable to assume that Kiyosaki isn't the one actively managing his investments like his article implies.

The article also has numerous other fallacies.
He equates cash flow on his apartments with profit.
"Rothschild formula for investing" = timing the market
He started investing in the stock market in august? Isn't that a tad early for crash?

Kiyosaki is just so good at buying low and selling high. He must be so smart in his imagination!

[fathersez]

You have made a very good point. The same goes for journalists covering health, science etc. They are just people who have learnt how to write and write well.

Then they talk to various others, say, analysts, fund managers, rich people etc. Then condense the story, put some nice quotes etc.

So they cannot be experts in investing.

After years of covering this area, they may have quite a bit of knowledge under their belts, but then FM is not all about knowledge, isn't it?

[Louise]

As a financial journalist, I take your point. But one thing you seem to be missing is that most financial journalists are not ALLOWED to hold significant investments in the companies they cover, and usually just have stock index fund investments or whatever. This rule is meant to preserve neutrality.

[Ryan]

Personally, I think a lot of journalists have a political bias and skew the recession talk based on who is in office.

[FMF]

Louise (and others) --

I'm not really talking about investing (buying stocks you might recommend), but issues more like staying out of debt, saving for retirement, and the like.

For me, it would be interesting if several financial writers would reveal their net worths/finances so we could see how well they do putting their own advice into practice. My guess is that there wouldn't be much difference between them and the general population.

[L]

I think they should also reveal their net worth as a function of their income. A net worth of $1M is pretty admirable if you make $50k/year. If you are (Suze Ormon, Kiyoksi, etc) and make 4,5..10? times that much, a net worth of $1M is just mediocre.

[Meg]

I agree! Besides that fact, journalists make a living trying to scare/excite you into watching their program or reading their periodical. They can't just repeat "buy and hold" or no one would bother reading more than one issue of anything. So you have to take their constant "analysis" and advice with a grain of salt anyway.

And as far as RK goes, he made a similar comment in one of his books that always stuck with me. The Rich Dad was explaining to him about bankers and other financial advisors and told him to ask the banker if he himself was a millionaire. Of course the banker was all caught off guard and started sputtering. It really made me think though. Why should we pay for advice from people who are struggling with their financials just as much (or more than) we are? At least RK can say he's practiced what he preaches.

[Sarah]

"None of these events really has much impact on professional investors, who follow market trends and are familiar with the underlying fundamentals of the assets they investing in. "

Ahahahahah. Tell it to Bear Stearns, Citigroup, and Merrill Lynch.

[ChampDog]

Have you guys thought of a good basketball coach is usually can’t play basketball too? Maybe this is a bad example?

[FMF]

ChampDog --

I don't think the example works. You need certain physical ability that some people have and some simply don't in order to do well at a sport. But anyone can master the basics of personal finance.

[anna]

I don't know...I mean, people give good advice all the time that they don't do themselves. It doesn't negate the value of the advice.

[Billy]

Sometimes I would rather take advice from the average Joe Blog who has had a great experience with getting funding etc. than people with a hidden agenda.
I got some advice from a agency called The Alternative Loan Machine about my personal finance. I would rather listen to someone with nothing to gain.