The Glenn Beck School of Investing

Should you take investment advice from Glenn Beck? - MSN Money 12/11/12 11:44 PM

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Extra 8/25/2010 7:00 PM ET The Glenn Beck school of investing

Conservative talk-show host Glenn Beck doesn't claim to be a money expert, but he does dispense a lot of financial advice. Are gold and seeds good places to put your cash? [Related content: gold, economy, Treasury, financial planning, politics] By Karen Aho

MSN Money

Glenn Beck likes to worry, and one of the things he's worried about is your money.

Leading conservative talk-radio hosts

As the conservative talk-show host sees it, progressives are wrapping up a decades-long plot to supplant the capitalist system with a godless, Marxist state, one where entrepreneurship, stock prices -- in fact, your entire financial future -- may as well be in a coma.

If that's not enough, there's rising debt and inflation to worry about, along with natural disasters, social programs and terrorist attacks. Sometimes, Beck worries himself to tears.

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Although there's a lot of fun to be had mocking the radio and television personality's on-air theatrics (Beck gets into the act, touting himself as the "crying conservative") and apocalyptic advice (stock the fruit cellar), there's no laughing at the very real anxiety he taps into.

His predictions, after all, are just a few steps beyond those of such respected economists as Nouriel Roubini -- the one they call Dr. Doom.

In Beck's case -- and no, he doesn't call himself a financial adviser -- it's not a stretch to envision an avid listener ending up with a cupboard of seeds, a pantry of dehydrated food and a stack of gold coins bought in part by cashing in a 401k (something Beck has said he's done).

It's that last idea that financial experts find worrisome. Here's Beck during a Fox News broadcast last year:

"How much did you lose if you had any money in your 401k? Did you lose, let's say, I don't know, 40% of it? So, that's gone. Now, did you know that the dollar has lost nearly 29% of its value in the last seven years? 29%. OK, that's gone. Just gone."

Beck is right that 401k's took a beating in the 2008-09 market meltdown, but since the rally that began in March 2009, stocks have regained about 60% of their value. Inflation, however, averaged just 2.51% a year from 2002 to 2009, for a 19% loss in the dollar's value.

But no mind. Although the facts may be off, the underlying sense of peril remains. And for those fears, Beck offers his vast audience -- now about 30 million strong across his media platforms -- plenty of prescriptions.

They range from the specific ("Buy this book today") to the vague ("Be prepared"), with seemingly contradictory switchbacks along the way ("Now may be the perfect time to buy gold," but on another day, "You don't listen to me for financial advice . . . don't").

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Should you take investment advice from Glenn Beck? - MSN Money 12/11/12 11:44 PM

Despite the twists, plenty of people do follow. When the Beck effect can be measured, it is profound. His recommendations can yank even a dry economic tome up to No. 1 in sales, sending publishers into frenzied reprints and Beck into that lofty sphere of media influence previously occupied only by Oprah Winfrey.

When Goldline International, a California gold coin seller, began advertising with Beck in 2008, the private company was generating $275 million in annual revenue. Two years later, revenue had nearly doubled, to $523 million, says the company.

So Beck is clearly good for his sponsors. (Or those that remain. More than 100 have left since Beck called President Barack Obama a racist; religious leaders called for a boycott after Beck equated social justice with Nazism.)

But is following his advice good for your money? Do his suggestions and product endorsements -- they can be hard to separate -- make good financial sense?

Advice for a 'crazy world'

Beck broadcasts for four hours every weekday, three on a syndicated radio show that reaches 9 million listeners in a week and one on Fox News, where 2.06 million TV viewers tune in daily. He posts an additional one-hour recap on his website, appears on colleagues' shows and speaks at his own "American Revival" rallies and comedy shows. It's a lot of talking.

Most of the talk is anti-administration political commentary -- often with Beck playing teacher at a blackboard -- that leans heavily on conspiracy theory and religion. Although he's seen on a television channel with "news" in its title -- and at the prime news hour of 5 p.m. -- Fox News classifies Beck's show as opinion, not news. Beck himself says he aims to "enlighten and entertain."

Though he doesn’t claim to be a financial expert, Beck uses some of his ample airtime to give money advice.

Of course, other conservative hosts draw equally wide multimedia audiences. But Beck is the most fervent among them when it comes to suggesting that some kind of "economic apocalypse" -- a phrase he's written on his chalkboard -- is near and in admonishing his guests to take specific actions to "prepare for the worst," a powerful one-two punch for a listener assessing his own financial portfolio.

At the Glenn Beck Program Web site, Beck's face adorns most ads, all of which appear plucked from the Doomsday Times. Recently those included an encrypted computer backup system ($55 a year), a survivalist newsletter (free), an emergency solar generator ($1,697), nonhybrid seeds to plant a "full- acre crisis garden" ($149) and "food insurance," a two-week supply of freeze- dried food in a backpack ($200) that Beck says is "great stuff."

"We live in a crazy world. I live in a nuts town," Beck says in a promotional video on the Food Insurance website, gesturing toward ground zero from his midtown Manhattan office. "You just want to be able to have some peace of mind," he continues, in a soft, reassuring tone. "Do the easy stuff now. Prepare yourself for what we all hope won't happen but probably will if you're not prepared."

The survivalist bent sounds more like Mormon teaching than financial advice. (Beck joined the church, which encourages food storage in preparation for disasters, during his drug and alcohol recovery in 1999.)

The ads dovetail nicely with Beck's commentary, in which he forebodes an "economic apocalypse" and prescribes a "3-G system" for protection: "God, gold and guns."

Combined, this all helps fuel sales of another product Beck endorses as "insurance," one that offers listeners an opportunity to drop some serious cash: gold.

Continued: All that glitters

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1 | 2 | next > The Glenn Beck school of investing

Continued from page 1

[Related content: gold, economy, Treasury, financial planning, politics]

All that glitters

On his TV show on May 19, Beck held two gold coins in his hands, scribbled figures on a chalkboard and said of gold's value: "It doesn't change with inflation. It never has."

Gold comes in many forms for investors, and plenty of experts have recently been touting the metal, an age-old hedge against market uncertainty. But what's in Beck's hand is telling: His programming leads listeners toward coins, particularly so-called collector coins with high markups that limit any investment value. (Read "Should you buy gold coins?")

In an ad for Rosland Capital, one of several sponsors of Beck's Fox News show, fellow talk-show host and former Watergate operative G. Gordon Liddy tells viewers to invest in gold. He then clinks several coins in his hand and says, in booming staccato: "That's the sound of security. That's the sound -- of gold."

In a report issued in May, Rep. Anthony Weiner, D-N.Y., called the pairing of such ads with hosts who habitually predict a plummeting dollar and economic collapse an "unholy alliance" that preys on public fears to sell overpriced coins.

Beck cried victim in behalf of all gold bugs, as fans of the precious metal are called.

Without addressing the consumer-protection issues -- allegations of misleading sales techniques and false representations as investment advisers -- Beck got out his chalkboard and outlined the government's underlying conspiracy: "They've got to have your money." If people buy gold, they're less likely to invest in government bonds and Treasurys -- money the government can spend, Beck said. The government's creation of Treasury inflation-protected securities, or TIPS, in the 1980s, he said, was an effort to steer individuals away from gold.

"They realized that if we have problems, people take their money out of bonds and put it into gold or silver or precious metals. When you do that, you then are in control of your wealth, and they lose money," Beck said.

"This is not about me or anybody else," he said, also on May 19. "This is about shutting down another way for you to protect yourself."

Advertising or advocacy?

Beck, through his production company, and Fox News declined interviews for this story. Goldline's vice president, Scott Carter, who agreed to one, says Beck is simply delivering its radio advertisements.

"We're buying an advertising spot. Some are taped; some are live reads," Carter says. "It's a pretty standard advertising agreement."

Those blurred lines are standard radio technique, and the difference can be tough for listeners to parse. Beck is careful to tell listeners to do their own homework, to "study it out," even "to pray on it," before deciding whether gold or another product is right for them.

But he also might go on for three minutes, a long time for an ad, mentioning how his own family cashed out some 401k's to buy gold. "It's not right for everybody," he'll say. "Find out if it's right for you and your family."

(Goldline also advertises with Beck in other media, but it's on the radio where the distinctions fade.)

But listening to Beck's homey, fireside voice, it can be easy to forget that his family's financial portfolio is probably not at all like yours.

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Should you take investment advice from Glenn Beck? - MSN Money 12/11/12 11:47 PM

"He's very, very good at connecting to his audience," says Alexander Zaitchik, an investigative journalist who spent a year researching Beck's life for the biography "Common Nonsense: Glenn Beck and the Triumph of Ignorance." "He's very sort of vulnerable and effeminate in ways that (his peers) aren't."

Beck's production company, Mercury Radio Arts (named in honor of Orson Welles' Mercury Theatre on the Air), pulled in $32 million in the year ending March 1, 2010, according to Forbes. He uses bodyguards, flies in a private jet and has multimillion-dollar homes in Connecticut and New York City.

Beck also has a "bottomless audacity" to "make bold claims about things that he knows nothing about," Zaitchik says. "Facts don't matter ." A financial adviser's advice

In the past two years, financial adviser Eric Tyson has been hearing from more and more people who begin their question with "Glenn Beck said . . ."

So Tyson, the author of "Personal Finance for Dummies" and "Investing for Dummies," started looking at the financial advice Beck was proffering beyond the advertisements. He even landed the near- impossible for anyone outside the conservative media circuit: an interview with Beck.

Beck's investing score, says Tyson: 0 for 3.

"He was basically telling people, 'Sell your stocks, get out of municipal bonds and Treasury bills, and put all your money in gold,'" Tyson says. "He gave all this advice, and toward the end of his interview, he says, 'People shouldn't listen to me.' OK, then why are you doing this?"

In fact, says Tyson:

Municipal bonds have excellent advantages for people in high tax brackets, and they're extremely unlikely to fail.

Gold is not nearly the long-term performer that either stocks or Treasurys are.

And, well, when stocks are down, you buy, not sell.

"From my analysis from a year ago, that was horrible advice," Tyson says, adding that in the year after the March 2009 interview, stocks rose 70% and gold 20%. "That's no contest.

"I had no crystal ball to know that stocks were going to rise 70%," he adds. "But I did know, as a student of the market, that they'd come back, even if you think the world's going to end."

To be sure, gold has outperformed stocks since the end of 1999, gaining 329% while the S&P 500 Index ($INX) lost 28%. But longer term, stocks have held the edge. Since Jan. 2, 1980, when trading in gold futures began, gold is up 115% while the S&P 500 has soared 890%.

As for Beck's theory that TIPS are a government effort to steer people away from gold: "Ridiculous," Tyson says. "It's just another investment option."

Beck has no apparent training in finance, say experts, and claims none. He began in radio as a precocious 13-year-old, bypassing formal higher education (apart from one unfinished theology class at Yale University) in favor of on-the-job training at suburban radio studios. Adding a political voice later boosted his talk-show ratings.

Beck has said that his own financial advisers rein him in when it comes to buying gold, limiting it to "15, maybe 20%" of his portfolio.

"People get into trouble when they start taking advice from people who don't know what they're talking about," Tyson warns. "You've got to separate politics from personal investing and finances."