Dick Morris Should Stick To Politics
&
Stay Out Of Investment Advising
by: Brendan Magee
Every afternoon Dick Morris, the guy who guided and advised Bill Clinton to the White House, comes on a local radio station in Philadelphia, Pa. and gives commentary on the news and events of the day, and I am a fan of his show. I listen pretty regularly on my way home from work.
One of the station's sponsors promotes himself as a retirement phase advisor and his message is for retired/senior investors to stay out of the stock market. He believes senior investors should crash proof their nest egg because they cannot afford to take such huge risks with their money. This advisor now has Dick Morris promoting the seminars he holds on a monthly basis. Dick Morris even has said that he will appear at these luncheons and sign his book should anyone bring their copy. Business is business and I have no problem with somebody promoting their seminars until they cross the line and start misinforming the public. Recently, Mr. Morris went over that line.
He agreed that retirees should not concern themselves with the growth of their money, but rather they should concentrate on keeping what they have. In other words, keep what you already have and do not concern yourself with the returns your investments are generating. Stick with investments that guarantee your principle, where you will never see your account go down. The ultimate fear they are throwing in peoples faces is that they could easily lose all their money with a crash of the stock market.
It's when a product is trying to be sold to the public that the truth gets set aside and the investor hears a message that on the surface sounds good but with a few questions seems anything but in the investor's best interests. Maintaining what investors have should not be the goal. That is a recipe that has proven time and again to more than likely have retirees running out of money in retirement. The goal should be to maintain its value, or purchasing power, which is very different from guaranteeing your principle.
We all know that a dollar today does not buy what it bought 25 or thirty years ago. A gallon of gas wasn't $4.00 a gallon in 1989. Tolls to get over the Walt Whitman Bridge were not $5.00. A loaf of bread wasn't $3.00. A new car didn't cost $30,000. These costs in most cases are double what they were in 1989. I know I could get a newspaper for under $1.00 back then. The reality is that 25 to 30 years from now these costs, simple everyday items, will probably have doubled or even tripled by 2039. Inflation has been here for a while and isn't going away any time soon.
If I took my money 25 years ago and deposited it into my bank savings account, no doubt I would have every penny I deposited into that account today plus a little bit of interest. However, if my money didn't grow at least even with the rising cost of living the purchasing power or the value of my money would have gone down.
Charles Ellis in his book "Winning The Loser's Game," showed how if the cost of living rises by four percent the value of money would be cut in half in just 14 years. So you retire at age 65 with $100,000 and follow Mr. Morris's advice and concentrate solely on not losing any money. Your money is safely locked away where it never sees any losses, and by age 79 with perhaps 10 to 15 years until you die, the value of your money is only worth $50,000. You haven't built security. You have experienced a 50% reduction in it.
This doesn't even take into consideration your spouse. What if she should be younger and have 20 years to go until she passes away? She has to make due with 50% less in purchasing power over those years. Inflation doesn't have a heart. It just keeps eating away at the value of her nest egg.
This is why what Mr. Morris is saying is so harmful to investors. He has a huge following and a very powerful radio station to air anything he says. Given that power his voice carries a bit of credibility, and on this occasion he is misleading investors.
If he really wants to help investors protect their financial security, it's inflation, not the stock market that is the real enemy. He needs to help people realize that retirement is a long-term process. If he were a real student of history he would point out that the only real hedge against inflation, long-term, is stocks. He would help people understand what the rules for successful investing are and how to apply them with discipline. He would try to help people understand and identify who the culprits are in trying to sway you from this time tested approach. He would help investors understand the illusions that the financial community uses when trying to sell commission based products. That is what a coach would do. Unfortunately, Mr. Morris isn't doing any of these things. He is part of a process that is misleading investors and putting their financial security in jeopardy.
Brendan Magee is the founder and president of Inevitable Wealth Coaching. with questions or comments go to www.coachgee.com or call 610-446-4322.
