Chris HopkinsThe end of America! H.R. 2847 to usher in collapse of the Dollar! You have just months to prepare! Take action now to survive the coming crash!
Not really. But it is likely that most investors have encountered these breathless prophesies of impending doom on TV, radio or the Internet directing them to a webcast purporting to make it all clear to the discriminating viewer. The primary purveyor of this financial fear-mongering claims to have produced the most-watched Internet video in history. Naturally, many people wonder if there is any truth in these dire warnings, given their chilling aura of imminent disaster.
Spoiler alert: nothing to see here unless you want to spend 50 bucks. That is the subscription price for a newsletter and five "special reports" that essentially advise you to buy gold, hide assets and plant a garden. The 90-minute video is vapid and incongruous, but effective as a marketing gimmick to attract the attention of already wary investors by playing upon their fears with attention-grabbing phrases like "looming catastrophe" and "imminent collapse." It is an example of the worst excesses of financial marketing intended to cynically exaggerate and exploit legitimate concerns.
It also happens to be way off the mark. Again. This particular firm first produced a 2010 video entitled the "End of America," forecasting (you guessed it) imminent collapse of the U.S. economy, complete with riots in the streets and martial law. Well, that didn't quite work out, so a 2012 revision predicted instead an unprecedented boom ahead, tied to the revelation that President Obama would somehow appoint himself to a third term. Seriously. Then a forecast of government "nationalization" of your 401(k) account.
Now comes the latest Internet video offering, warning about a "secretive" provision in the sinister bill HR-2847, signed into law in 2010 requiring foreign banks to disclose deposits of U.S. citizens. Effective July 1, 2014, the new provision creates a climate "infinitely more dangerous" than the 2008 financial crisis, likely to trigger a "near-complete shutdown of the U.S. economy," according to the video. Two months hence, it seems like a pretty slow-moving collapse so far.
The firm behind these alarmist admonitions is Stansberry Research, a Baltimore company engaged in the business of selling newsletters and research reports. Ironically, materials on their website show little evidence of erecting a bulwark against the oncoming economic carnage, instead dispensing reasonably conventional if unremarkable investment advice. It is the egregious nature of the ad pitches that does investors in the general public such a disservice.
The firm's principal has learned from experience how to skirt the rules of propriety. Fined $1.5 million by the SEC in a 2002 fraud case involving a hot stock tip, Porter Stansberry's firm now sticks to issuing outrageous warnings of economic cataclysm to frighten investors into subscribing.
Early in the latest seemingly endless video, patient viewers are assured free access to a special report at no cost and with no request for a credit card. But 89 minutes later, leveraging augury of a complete shutdown of the federal government, the real deal turns out to be a trial subscription (prepaid of course) with a four-month refund guarantee.
Ads for these videos are so pervasive that many financial advisers find themselves entreating nervous clients to ignore them. This type of marketing abuse complicates life for the vast majority of advisers who conscientiously focus on their clients' best interest. Investors certainly have legitimate concerns, but the "End of America" is not one of them.
Christopher A. Hopkins, CFA, is a vice president for Barnett & Co. Investment Advisors.