Foolish Financial News Focus

Why is there no mainstream audience for our small band of Casandras who see debt, including massive pension and OPEB obligations, as the critical financial issue of our time?

Because people prefer to  hear what they want and listen to those who so accommodate them.  That’s what I got out of ‘Pound Foolish: Exposing the Dark Side of the Personal Finance Industry” by Helaine Olen.  I also got these excerpts:

[Sylvia Porter] eschewed what she called “bafflegab,” the sorts of terms people who like to sound smart use even though they obscure the facts.  p. 15

But in the world of personal finance, the increasing problem Americans were having keeping up financially was not viewed as a social justice problem, but as a knowledge and smarts problem that could be solved on an individual basis, one investor at a time.  p. 22

The [personal finance] genre was initially viewed by publishers and broadcast bigwigs as a way of giving something of interest to their readers that would not offend the car dealers, supermarkets, and real estate brokers who were their main advertisers, and were all too often offended by the original thrust of the consumer movement, which critiqued their practices in very specific detail.  p. 24

So, instead of freeing publishers and station managers from the tyranny of complaints from the auto, real estate, and retail industries, the emphasis on personal finance ultimately created yet another powerful advertising client base that would need to be appeased.  As a result, it became increasingly difficult to rock the boart by questioning the assumptions behind much of the financial information presented, rendering much of the advice glib at best and suspect at worst.  p. 25

But as [Elizabeth] Warren and her daughter demonstrated, buying televisions wasn’t the issue for most Americans.  The problem was the fixed costs, the things that are difficult to “cut back” on.  Housing, health care, and education cost the average family 75 percent of their discretionary income in the 2000s.  The comparable figure in 1973: 50 percent. p. 58

It sounds great.  It’s what we want to think is true.  But it’s not true.  Interest rates matter and they matter a lot.  p. 66

The best explanation anyone can come up with for this phenomenon (Dave Ramsey) is that people so want to avoid bankruptcy, they will listen to anyone who tells them not to do it.  p. 67

James Scurlock told me…”Dave is a very charming, likeable guy who tells people what they want to hear, which is dressed up as tough love.”…..Lis Weston…”What happens is they take money that would be protected like home equity or retirement accounts and keep throwing it at unpayable bills.” p. 68

This fear is a by-product of the do-it-yourself retirement rend that has taken hold in the past thirty years….a change that occurred without much discussion or consideration of the consequences.  p. 76

“I am not charmed by 401(k) plans,” Ghilarducci told the committee.  “When I look into the abyss of retirement income security, I find them to be very feeble efforts by the government to try to stem the crisis.” p. 78

One speaker (at a 401(k) Rekon seminar) suggested pitching plans to business owners that offered ways of maximizing their own retirement swet-asides, while simultaneously minimizing their contributions to their employees’ savings. p. 84

Employers contribute to the problem because many want to offer employees a popular perk while getting someone else to pay the bill.  One way to do this is to not ask too many questions of retirement plan providers offering companies low-cost plans, who then make their money off the clueless employees by charging them higher-than-necessary expenses……As a result of all this stuff, numerous companies have been sued in recent years for allegedly placing employees in investments with either subpar returns, excessive fees, or not revealing conflicts of interest to consumers, including Walmart, Caterpillar, and, my personal favorite, Ameriprise Financial, which stands accused by their workers of putting them in poorly performing investments managed by …Ameriprise Financial.  p. 86-7

As for sellers of variable annuities, they are widely believed to be behind attempts to block the SEC’s implementation of the fiduciary standard.  “If you need to act in the customers’ best interest,” Pat Huddleston, a former enforcement branch chief for the SEC and longtime investment rights activist said to me, “you can’t sell this crap.” p. 111

Financial smarts peak at fifty-three, and by our sixties we’re on a downward slide.  p. 122

people believe what they want to believe.  Whether those beliefs come from greed, desperation, or financial illiteracy doesn’t change the basic problem. p. 149

8 responses to this post.

  1. Posted by Tough Love on March 15, 2013 at 10:45 pm

    Driven by a rather large serving of greed, self-interest and our homegrown “entitlement mentality”.

    Reply

  2. Up among the top of your blogs I have read! Elizabeth Warren type people for ‘Presidents’, along with all writers here.
    Can not put the facts any simpler so why don’t citizens accept the solutions?
    Thanks for the downward slide, age 75. Want to hear my volume theory for why wealthy control us?

    Reply

  3. Posted by muni-man on March 16, 2013 at 11:26 am

    “The problem was the fixed costs, the things that are difficult to “cut back” on.  Housing, health care, and education cost the average family 75 percent of their discretionary income in the 2000s.  The comparable figure in 1973: 50 percent. p. 58”

    No surprise there – they just happen to be gooberment’s Big Three favored cartels: education, healthcare and finance. Their two common denominators – they’re actively supported politically and financially by powerful interests in Washington to ensure their survival and further growth, and they are largely failures in most everything they do. They overwhelmingly benefit the relatively favored few who endlessly feed off monstrous gooberment subsidies, driving prices thru the roof for everyone else.

    Reply

  4. Posted by George on March 16, 2013 at 5:15 pm

    Why is there no mainstream audience for … anything? What news is treated seriously? The US is involved in wars in like 5+ countries, you see any news coverage. It is not that there is no raw news, sites like liveleak have piles of compelling war videos. Immigration issues? There is no news coverage of anything.

    It is possible that in the past news was in part funded by selling papers or subscriptions so they though a bit about what they needed to publish for their readers.

    The only real newspaper left I can think of is The Chief: http://thechiefleader.com/ Which caters to its civil service readership.

    It is not clear what the problem is exactly. People still pay for newsletters and other stuff, so why not news.

    Reply

  5. Posted by George on March 16, 2013 at 5:17 pm

    Look an article about a financial topic that shows some respect for the issue. In the Chief.

    MTA: Rising Pension and Health Spending Exceeds Fare-Hike Gain

    http://thechiefleader.com/news/news_of_the_week/mta-rising-pension-and-health-spending-exceeds-fare-hike-gain/article_f9b9b114-89cd-11e2-b5f6-001a4bcf6878.html

    Reply

    • Posted by Tough Love on March 16, 2013 at 8:02 pm

      The SOLUTION to that problem is not one the MTA wants to pursue.

      REDUCE the CURRENT workers’ pensions & benefits (for FUTURE service) to the average (expressed as a % of pay) pensiosn and benefits typically granted Private Sector workers by their employers.

      W/o doubt, doing so would require a 50+% decrease.

      Management will never consider that BECAUSE they also participate in the PORK-FEST … they know they’ll always get what the workers get + a bit more. Cutting the workers’ pensions & benefits likely means cutting there own as well ….. not gonna happen.

      Reply

      • Posted by skip3house on March 6, 2013 at 6:31 am

        The pensions are also to enrich the politically connected who ‘retire’ from their elected/appointed posts after manipulating highest pay and years of ‘service,’ qualifying for crazy/high pensions and free medical to death.
        Examples could be that retired Middlesex mayor a few years back, various legal, and just medical for Port Authority member Susan Bass Levin, who got a ‘no-show’ NJ committee appointment from Corzine to build up the years necessary Part of the deal she needed to accept that terrific position.

        Said another way, but we are just circling the action needed. Let’s all invade one of those ‘set up’ town hall meetings, or all demand to be heard the same time at a NJ Legislature meeting, Course, we are blocked by no I&R………

        Reply

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