Multiple winners this time. If the Nobel Committee can give a prize to the European Union, we can give one to a readership.
October’s honorees are the people who pose questions to USA Today money columnist Matt Krantz. That’s instead of giving the award to Mr. Krantz himself, who’s only issuing pat answers to fill column inches. (By the way, USA Today, why did you make your paper harder to read? Is it so you can more easily kill your print edition? And aren’t leading questions great?)
It’s fine when someone like Dear Abby dispenses advice via a newspaper column. The answers are obvious, the advice is straightforward, following it probably won’t result in any lasting damage, and most of the questions are of dubiously concocted origin anyway. But Mr. Krantz’s advice is predicated on incorrect or overly general assumptions. Here’s what we mean.
Q: Is it best to avoid investing in China since the economy seems to be slowing?
China’s economy might not be as robust as a fully developed First World one, especially on a per capita basis, but the Chinese are getting there. More importantly, when your economy involves 1.2 billion people, it can’t help but be diverse. “Investing in China” is a phrase as vague as “attending a college” or “drinking something”. Are we talking about a glass of skim milk, or a double shot of Everclear?
That doesn’t prevent Mr. Krantz from offering universal answers. Why he responded to the reader’s question with anything other than “You have to be more specific”, we have no idea.
The iShares FTSE China 25 index exchange traded fund has fallen nearly 30% from its two-year high set in November 2010.
So what? At the very least, it sounds like the iShares FTSE China 25 is having a sale. A legitimate answer would require our columnist to examine the iShares FTSE China 25’s components. These include China Mobile, the world’s biggest telecommunications concern. (Calling a business a “concern” is funny for some reason, as The Simpsons has shown to great effect.) They also include Petrochina and Bank of China, 2 other state-owned enterprises that enjoy oligopolistic power in what’s supposed to be a burgeoning economy. But no, evaluating even a couple of the 25’s components would take some fundamental analysis. Which consumes time. That won’t do, not when there are easy and unhelpful answers to deliver.
But “Should I invest in China?” is amazingly detailed compared to some of the other questions Matt Krantz fields.
If you restrict yourself to securities, the riskiest bet is a 500-way tie among penny stocks on the Canadian Venture Exchange and the Pink Sheets. Mr. Krantz explains that small-cap stocks are bad, then contrasts the percentage return of that entire asset class with that of larger stocks.
But people don’t buy “small-cap stocks” en masse, unless they’re buying a small-cap stock mutual fund, a point of differentiation that Mr. Krantz should have mentioned. (If all this jargon is confusing to you, and you don’t know where to start, behold this plug for our book. We’re not the only ones to call it the Greatest Personal Finance Book Ever Written. We start off by assuming you know next to nothing, and by about the halfway point you’ll already be far better versed in personal finance than any of Mr. Krantz’s alleged questioners.)
Never mind that a 5-second visit to Wikipedia can give a more detailed answer than Mr. Krantz can. Can we stop the charade of writers passing their own topics of interest off as “reader questions”?
It’s not that the advice in this column is necessarily bad, it’s just unbelievably simple. No one’s ever accused USA Today readers of being overly sophisticated, but come on. One “reader” “asked” “How risky is investing in bonds?” Mr. Krantz responded by explaining that bond and stock prices often move in opposite directions, bonds are less volatile than stocks, etc. True as far as it goes, but not exactly groundbreaking and of no help to the investor who needs data more pertinent than
the worst year for large U.S. stocks [was] 1931, when the Standard and Poor’s 500 index lost 43.3%.
Like a good lawyer, Mr. Krantz (nor any of his alleged readers) doesn’t ask any question he doesn’t already know the answer to. Such as “How can investors benefit if the housing market is truly recovering?” It takes almost no effort to Google the names of some prominent home builders, then barely more effort to examine their financials on Yahoo! Finance. (Again, if you don’t know what to look for here, buy our book. Heck, there’s a link at the top of this page.)
How do you live with yourself, calling this advice? You do realize that at least a few of your readers are gullible enough to act on your recommendations, right? Just because you’re not telling people to load up on specific overpriced stocks doesn’t mean that you’re providing an honorable reader service here. And look what you just made us do – a double negative.
For the 5th grader in your family who enjoys reading the financial section, Mr. Krantz’s column is fantastic. For those of you who require more detail…well, pick a random article from our archives.