July 7 2009|11.40 AM UTC

Jonathan Rivers

Hall of Shame: 12 of the Worst Financial Gurus

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Specialists plays an important role in society, disseminating expert knowledge to those without time or inclination to become the same. There are gurus in all areas of life, from fitness to real estate to finance. Unfortunately, the predictions and advice of authorities in this last category have a less than stellar track record. Looking into the future with rose-colored glasses, finance gurus have led their followers into trouble time and time again – especially in the years preceding our current recession. Others didn’t exactly court disaster but rather, they emphatically gave dubious or downright wrong advice. Should anyone establish a financial guru “hall of shame”, these are our 12 inductees.

Jim Cramer

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The exuberant host of CNBC’s Mad Money had his role in the current stock market meltdown illuminated in a March 2009 interview with Jon Stewart on The Daily Show. Abandoning his jokes for an uncharacteristically serious interview, Stewart skewered Cramer from pillar to post, chiefly for recommending that Americans invest their 401(k) and pension funds in firms like AIG and Bear Stearns that were known to be in serious financial trouble. Cramer justified it by claiming the CEOs lied to him, while Stewart countered that taking those lies at face value and reporting them as rock-solid investment wisdom was irresponsible. The Huffington Post has the entire three part interview up for easy viewing on its website.

Bernard Madoff

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While not a “guru” in the televised or published author sense, Bernard Madoff nevertheless assumed that role to all of the many individuals and corporations he persuaded to invest with him. In terms of bare, crass deception, Madoff stands tall above everyone on this list. The disgraced ex-businessman orchestrated what Reuters calls, “…Wall Street’s biggest and most brazen investment fraud”, that resulted in the swindling at least $50 billion from numerous investors The most chilling aspect was that the biggest victim turned out to be New York Mets owner Fred Wilpon, a childhood friend of Madoff’s. In Madoff’s scam, Wilpon is estimated to have lost as much as $300 million according to the New York Daily News.

Robert Kiyosaki

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Harvard MBA John T. Reed sums up the case against Kiyosaki in the first paragraph of his book review:

Rich Dad, Poor Dad is one of the dumbest financial advice books I have ever read. It contains many factual errors and numerous extremely unlikely accounts of events that supposedly occurred. Rich Dad, Poor Dad contains much wrong advice, much bad advice, some dangerous advice, and virtually no good advice. [emphasis original]

Reed goes on to reveal many illogical and harmful notions promulgated by Kiyosaki, including, “…if you’re gonna go broke, go broke big” (the correct advice is “don’t go broke”) and that, “…the reason you want to have rich friends” is to become privy to inside stock information (felony violation of insider trading laws.) Other gems of wisdom include using “weasel clauses” in your contracts by naming your cat is a silent partner and attempting to write off health club expenses on your tax return (tax fraud). Reed quotes a reader e-mail stating that the reader’s 17 year old son has decided, based on Kiyosaki’s bashing of education, not to attend college or study anymore. Interestingly, Kiyosaki was unknown in the financial community, and did not begin selling books in any serious quantity until Amway distributors picked up his book.

Wade Cook

Financial experts are rightly expected to be on the up and up regarding their own money before dispensing advice and suggestions to others. So it was quite alarming when Wade Cook was indicted and later sentenced in 2007 to 88 months in prison for tax evasion and obstructing a tax investigation between 1998-1999. He was also ordered to pay $3.5 million in unreported taxes. But Wade’s misconduct appears to stretch back even further. According to the Seattle Post-Intelligencer, Cook’s sentencing took into account, “…pre-sentencing reports that in 1990, Cook was indicted in Arizona on 18 charges of fraudulently selling unregistered securities and conducting illegal enterprises.” Specifically, the FTC had taken action against Cook in 14 states for, “…improperly taking money from investors” and imposed penalties totaling $2.7 million. At the height of its success, Wade Cook Financial Corp. raked in over $100 million in annual revenue selling seminars and home-study courses on investment and tax topics, employing 550 people.

Donald Trump

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No one can deny the massive success Donald Trump has enjoyed personally. But The Donald” has not been of much help to the average Joe. One of Trump’s most recent books Why We Want You To Be Rich (co-authored with Robert Kiyosaki) pitches, of all things, multi-level marketing as the way to learn business skills and achieve financial independence. (Maybe they should ask Bernie Madoff’s victims their opinion on MLM.) This is dubious advice at best, as MLM’s 90%+ failure rate is widely documented. TheMLMFile.com elaborates with some frightening conclusions:

It is true that something like four out of five small businesses (about 80%) fail in the first five years of operation. It is also true that somewhere around 99.5% of MLM-ers fail in the first two years. Distributor failure rate for MLM is generally around 60% per annum, meaning that the “best” MLM companies lose their entire distributor base in something under every two years.”[emphasis original]

The Wall Street Journal panned the book in a review entitled “Rich Men, Poor Advice: Their Book is Hot, But Their Financial Tips Aren’t.” And let’s not forget Trump’s repeated run-ins with bankruptcy, including one in 1992 that forced him to give up 49% of the Trump Plaza Hotel to five different lenders, according to the New York Times. Perhaps we should hesitate to take financial advice from a man apparently dumb (or devious) enough to partner with Robert Kiyosaki and is more experienced with bankruptcy than the most Americans.

James Glassman

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While all the current media coverage centers on the 2009 recession, past downturns had their share of misguided finance gurus, too. One of them is James Glassman, who in 1999 (a year before the dot come bubble burst) famously said “We’re going to reach a point where stocks are correctly priced, and we think that’s 36,000 … It’s not a bubble. Far from it. The stock market is undervalued.” As USNews states, the typical price to earnings ratio of dot coms were outrageous, sometimes over 40. Glassman also authored the book Dow 36,000 which falsely predicted that the stock market was undervalued and would triple within a few years.

Larry Kudlow

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The last thing investors should have been told in early 2000 was that the stock market was just fine. Nevertheless, Larry Kudlow assuaged investors’ fear by telling them that, “…this correction will run its course until the middle of the year. Then things will pick up again, because not even Greenspan can stop the Internet economy.” Anyone who invested based on this advice took part in the $5 trillion bath Wall Street took on tech stocks from March to October of that same year, according to TechRepublic. How Kudlow could have made such a prediction with a straight face is beyond us.

Suze Orman

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Some would be puzzled by Orman’s inclusion on this list. As a financial authority with her own TV show and a legion of best-selling books, it may seem odd to criticize her. But she is far from blameless when it comes to gurus with false predictions and questionable advice. BadMoneyAdvice.com lambasted Orman for using her celebrity to, “…bring her vast audience fairly mediocre and amateurish advice.” Specifically, the author takes Orman to task for breathlessly telling us all how great of an idea it was to get adjustable-rate mortgages in the years preceding the sub-prime crises. TheBigMoney.com notes that Orman also holds most of her own money in municipal bonds while advising readers to stash theirs in stocks. Finally, USNews remembers Orman’s infamous Janurary 2001 statement that QQQ was “a buy” so long as you invested using month by month dollar cost averaging when, in fact, the stock’s value dropped over 60% by October 2002.

Myron Kandel

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Anyone willing to cut Larry Kudlow some slack for making his Pollyanna-esque prediction so early in 2000 will have a tough time excusing CNN‘s Myron Kandel, who was so inexplicably optimistic about the market that he said, “…the bottom line is, before the end of the year, the Nasdaq and Dow will be at new record highs” in April, according to MarketWatch. As late as September of the same year, Kandel apparently also predicted the market would rally to 12,000 before Election Day. Needless to say, both of these prognostications were so far off the mark as to make one fear for Kandel’s sanity.

Lou Dobbs

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Some analysts take a cautious tone with their predictions, being careful to couch them in vague language so critics have difficulty sticking it to them if the prediction is a bust. Not Lou Dobbs – he came right out in August 2001 and said (according to MarketWatch “Let me make it very clear. I’m a bull, on the market, on the economy. And let me repeat, I am a bull.” Unfortunately for him and anyone who invested on the wave of his giddiness, the Dow and Nasdaq both remained in the tank for another year.

Alan Greenspan

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While generally a respected and well-intentioned man, there can be no denying Alan Greenspan’s misread of the economy during the 2000′s. ABC News remembers his words in December 2000, prior to the housing boom and bust:

“…the three- to five-year average earnings projections of more than a thousand analysts, though exhibiting some signs of diminishing in recent months, have generally held firm at a very high level. Such expectations, should they persist, bode well for continued strength in capital accumulation and sustained elevated growth of structural productivity over the longer term.”

This speech took on new significance when in October 2008, Greenspan admitted that he had “found a flaw” in his economic philosophy and was “partially wrong” in his management of the Fed, according to the UK newspaper Guardian.

Jeffrey Applegate

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Now that Lehman Brothers’ central role in the 2008/2009 market debacle is clear, Lehman strategist Jeffrey Applegate’s 2000 statement that, “…the bulk of the correction is behind us, so now is the time to be offensive, not defensive” does indeed appear to indicate, as USNews opines, that the recovery from the dotcom bust was “a sucker’s rally.” With the kind of fraud that was going down at Lehman Brothers day in and day out, hindsight makes it very obvious why they were so bullish back then.

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{ 65 comments… read them below or add one }

Larry July 9, 2009 at 11:12 am

wilding, it seems pretty ironic that you’ll criticize someone else’s work while your very own website reads like another Internet get-rich-quick infomercial. I do agree with you that some of the quotes are selective, but the fact that other readers started providing reasons of their own on why some of the “gurus” listed above belong there… should also say something about the gurus listed. This blog is like any other blog, it has a mix of sensationalize post along with regular informational resource post. How about this for you? Why don’t you offer your readers your “7 Figure Million Dollar Secrets” without requiring readers to submit their emails or phone numbers? I know you can do it. Dig deep.

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AW July 10, 2009 at 9:41 pm

Yeah, would have to agree with list but 20/20 hindsight is always easy to pick out. What would be more interesting is picking out the future idiots. Alot of financial “gurus” now predicting the worst is over, green shoots taking hold, the end is near, recovery is occuring, out by year end etc. Will this make for a future list ?? Only time will tell but I can tell you this. I stopped listening to gurus except to use them as a contrarian indicator.

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Tony Frank July 11, 2009 at 12:04 am

Outstanding article. You have listed some of the most egregious charlatans and thieves of all time.

I continue to be amazed that the fleeced lemmings listen to any of these idiots.

Keep up the good work.

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Jeff Delagado July 11, 2009 at 9:00 am

I hope all of you go to school, get good grades, get a SAFE, SECURE job with benefits, 401k, and retire with SOSO security after the US Government has printed $14 trillion since last Oct!!!!!!

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Staples July 12, 2009 at 8:41 pm

I was a wide eyed green investor a and thought that Cramer was the shit. Coming from a humor background, I jumped on his bandwagon immediately. It was about 2 years ago, I kinda went not against his advice, but didn’t sell when he said . It made no sense. It was with GameStop and Halo 2 I believe. He said load up a week or 2 or longer before and sell it all the day it comes out??? Why would I do that. I said at least wait and see how it sells. Needless to say I held it just before the bonuses were made and made a lot more than Cramer’s lousy advice. That always seemed curious to me.

Now I see things so differently. If any of you have heard or read the article on http://www.deepcapture.com about Cramer, Dendreon, Goldman Sachs and bringing back the junk bond king himself, Michael Milken and others with naked shorts and market manipulation. I never felt so green in my life.

the NY Times called it a good read. They are a bit smarter than me I think too

Michael Milken and 60,000 deaths…etc, I really don’t recall the whole title, but its very interesting and a lot of digging

Staples

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NotHarry July 14, 2009 at 3:31 pm

Harry S. Dent Jr.

Carleton Sheets.

Robert Allen whose advice went from buying highly leveraged real estate to selling infotrash on the internet.

David Bach is borderline.

Not a fan of magic formulas because the magic formulas can’t interpret the news and what it really means.

I’d give Weiss, Schiff, Bonner, Wiggin, and even Robert Prechter a pass for now because they did a better job anticipating what’s happening now than most.

I would almost give Cramer a pass because I see him as an entertainer, not a serious investment advisor.

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Ferrari Guy July 23, 2009 at 11:44 am

where are the guys from long term capital management they were basically the best and the brightest organizing basically the largest fundraising ever and also earning astounding profits for a company in their first 2 years only to be 4 billion in debt a few years later (you know in 1999 when 4 billion was alot)

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hsg August 4, 2009 at 8:52 am

I agree with you on a lot of them but one thing you forgot to consider was 9/11. You say a lot of them in 2000 or early 2001 made bad predictions on the length of the recession that was about to come. No one could have predicted 9/11 which prolonged it considerably.

I agree on Trump, Suze, Kudlow, etc. Everyone seems to have forgotten Trupm’s bankruptcies where he screwed investors to the hilt.

keep up the good work

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Anonymous October 1, 2009 at 5:29 pm

all critics do is comment on others’ successes or failures. How silly is it to criticize a player on the court when you are just a speculator in the audience. If you could do a better job, why don’t you? Critics just talk talk talk, whack, whack whack. Your criticism damage more people’s lives than a atomic bomb because you damage their minds.

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B. Andrews October 19, 2009 at 9:27 am

Dave Ramsey gives a lot of good advice, but he is also a bit kooky. He tells people to cut up credit cards and pay cash for everything, which on the surface is a good idea. But I got no response when I emailed him about how FICO scores influence insurance costs. He tells everyone not to pay attention to FICO scores and to try to live on rice and beans for years in order to pay cash for a house. Well, that might work for some, but definitely not for everyone. He also spouts off too much right-wing politics for me, but then that’s Fox News for you. He makes a lot of money from his seminars and books and even charges for his web site.

OTOH, I like Suze Orman. Her advice has helped lots of people. And her web site is free.

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SJ December 11, 2009 at 10:45 am

Couldn’t agree more about Trump being on the this list.

I’ve learned so much from Kiyosaki. I’ve read and own most of his books and own four properties. His concepts and assertions are very helpful because they challenge the standard dogma. Sure he’d flunk a college level accounting class because he believes that your personal residence is a liability and not an asset! But the author is missing the larger point. Kiyosaki believes that your personal residence provides shelter. But the rest of the bells and whistles just cost money (ie mortgage, taxes, maintenance, upkeep….)and are expenses. To that extent, your house sucks up much of your income every month. It also forces a lot of people down the path of being employees (who pay maximum taxation via their w-4 gross income). Kiyosaki calls this path “The Rat Race”. Rich Dad Poor Dad touches on a lot of very important topics that lead to a different path through life (frugality [it really IS in there!], living well below your means so you can buy cash producing assets, and using a corporation or other entity to hold your cash producing assets because of the many tax advantages).

The argument about not valuing education is just semantics. Kiyosaki says knowledge is invaluable, but that you won’t necessarily find acquire it in most school curriculums. Besides the normal reading, writing, and arithmetic, Kiyosaki is a big advocate for history, taxation, the stock market, personal finance, real estate, politics, sales, etc. This is not what most people learn about who go through the American education system.

Maybe this path isn’t for everyone, but I disagree with the criticisms about Kiyosaki. And yes his book RDPD was extremely poorly written/edited, but that doesn’t mean I can’t learn from it.

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Jaded December 17, 2009 at 12:58 am

The bears turned out to be correct in 2008 but those same bears feel foolish for calling a continuation of the market meltdown in 2009. I work in the financial industry and can tell you that no one really knows what’s going to happen with certitude. For example gold – is it in a bubble or is it poised to climb to $2000 per troy ounce? Even if you guess right – your reason for guessing right is probably WAY OFF THE MARK! Truth is the Fed and Treasury have kicked the can down the road and done so remarkably well. But make no mistake we’ll see all these problems come back but magnified. The banks are now legally lying about the value of their liabilities (mark to model vs. mark to market accounting ala March 2009). Unemployment isn’t even as scary as it’s going to get.

So here’s my take on things:

Goldman Sachs is the new evil and a pompous delusional evil at that. Blankfein thinks that they could have survived and their traders are infallible but Goldman bought Credit Default Swaps from AIG, an institution that if Congress allowed to fail, would have brought Goldman right down with it. Lloyd – you’re smart but don’t think for a second you cheated death without taxpayer money.

Larry Kudlow. SHUT UP! If you can’t give an objective view of the market and are going to lull people into a false sense of security, why the hell does CNBC give you airtime? If I had a nickel for every time you said “goldilocks” in 2007 and 2008 we might be able eliminate the deficit.

Bernanke may have gotten us out of this mess t-e-m-p-o-r-a-r-i-l-y but his belief that you can mess with mother nature and things will turn out the way you predict is a lark. The Fed, by keeping rates low after the tech wreck in 2000, fueled the financial crisis that was 2008. Bernanke’s Fed was raising rates at exactly the wrong time when even donkeys like Cramer knew the housing market was set to implode. Bernanke got to play god in 2008 to get us out of the crisis but here’s the rub – it’s still just an experiment and he doesn’t know how it’s going to turn out. My guess is very badly but the time frame won’t be known for sure until we examine it from the history books. I wonder if Time Magazine prints retractions for “Person of the Year”?

Suze Orman says it best: she was a dumb hick who came to Wall Street to make it big. She does have some very salient financial planning advice, I have to admit. However, most of her advice is directed to people who don’t have two nickels to rub together. Pay off your credit cards. Really? Are you sure? She had one very lucky break – Oprah liked her and peddled her to America. That’s all it takes – look at that windbag Dr. Phil. That guy loves to hear his own voice and is so full of himself. Please Oprah – stop annointing these buffoons that the rest of us have to put up with on the daily talk shows for the rest of our lives. (Dr. Oz excluded from buffoon list) In the 90′s Orman told everyone on air – don’t trust advisors/brokers, buy an index fund and you’ll save that fee your broker charges. Thanks Suze – for the past 10 years people have a total loss of 16% following your brilliant strategy. I will say that there are some ridiculous advisors who would have done no better. But following her advice blindly with one of her books is not sound financial advice either. It’s giving money to Suze by way of her books rather than to your broker.

Ric Edelman: Here’s a priceless nugget of your wisdom: Get the largest mortgage you can afford and take forever to pay it off. Ha! How do you look at yourself in the mirror, Ric, without giggling your ass off about how you’ve duped people into NOT paying off their mortgages so they could invest more with you? You must be laughing all the way to Eagle Bank. You win my worst advisor badge of dishonor because while you told people to get the largest mortgage they could afford and plow their money into the funds your investment firm sells, they lost their houses because of an asset bubble bursting and they lost the money you helped them invest in your stock funds. The supposed equity that would build naturally in their house is now negative. Many of these poor people owe many thousands more than they paid because they are upside down in their mortgage. How’s this for a statistic? 25% of all mortgages in the United States have a higher value than the real estate behind it. It’s common sense that by the time you retire, you shouldn’t have a mortgage to suck the remaining life out of you in your golden years. Great advice Ric.

Here are people worth reading: Nicolas Nassim Taleb. Fooled by Randomness is a book that won’t help you invest but it proves the folly of thinking anyone including the experts know what’s going on in the market all the time. There’s always something outside your purview that gets you… just google Merton, Scholes, and LTC for a whopping example of smart guys losing billions. Jeremy Grantham was right about selling and right about buying the market back in ’08 and ’09 respectively. He’s already told his readers to get the hell out again back in October. Even if the market added another 10% since then… I believe his call is correct. Finally, David Rosenberg is a genious. He’s been wrong about the stock market rebound this year but he’s been right about commodities and bonds. If you want a roadmap for investing for the next 10 years: look at Japan – we’ll get more than a few clues from their asset bubble/credit collapse. Although, I don’t think Ron Paul cares much about social issues – he would have done a better job than any of the other candidates in getting us out of this mess. It would have been painful, no doubt, but at least we wouldn’t be deluding ourselves into thinking that everything is fine and getting better every day.

Good luck with the advice you get and the advice that’s omitted.

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Lisa March 6, 2010 at 1:20 pm

Frankly, anyone associated with the financial industry, I think, is either tainted or not that sharp. For all of these folks to say “no one could have seen the downturn coming” and then expect me to turn to them for advice in the future must be living in la-la land. I fully expect “high risk” investments to be suspect, but when you invest in what are promoted as “low risk” or “lower risk” and then get hit equally hard, something’s not right. Until I see some serious effort made to regulate the industry and control questionable financial instruments such as credit default swaps, I’ll be happy to stay out and live a much simpler life.

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Petey April 22, 2010 at 6:38 am

This is a pretty shallow list. While the choices are not exactly arbitrary -every choice became to some degree infamous in the media- they’re not based on any reasonable enduring standard, either. Lumping together 1) outright con men like Wade Cook, 2) mediocrities whose reaches exceed their qualifications like Orman and Dobbs and 3) unquestionably astute experts who succumbed to zeal like Greenspan and Applegate is…well, it’s silly. As is equating a guy who sells bogus personal finance products with a guy who sets the prime interest rate for the largest economy in the world.

Isn’t there, or oughtn’t there to be, a lot more to “false guru” status than simply making an incorrect prediction? I mean, it ain’t like you couldn’t have found 12 confidence tricksters if that was your standard.

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dleet December 6, 2010 at 4:52 am

How about Robert Markman “Hazardous to your Wealth”.. His gems, don’t invest for value, or international

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