Update: Commentator Glenn Beck Dispenses Investing Advice: Should You Follow?
publication date: Jul 28, 2010
Update July 28, 2010: More than one year later, Glenn Beck's investing advice is looking much, much worse, as I expected it would. The column below was written on May 4, 2009 and the insights still apply today.
Another recent development: Goldline, the gold coin dealer Beck is in bed with, is now under investigation in California due to dozens of consumer complaints for misrepresentation among other alleged misdeeds. Those who read the article below last year learned the smartest ways to invest in gold. Beck and his staff should do more homework so that he doesn't lead his large viewing audience astray in the future.
Q: Glenn Beck on Fox TV recently said that he would not invest in stocks or muni bonds at all and recommended investments, including gold and Treasuries, which I have no position in. I have all of my money invested for my retirement in bonds and stocks. My portfolio is well diversified and I hold muni bonds outside my retirement account and highly rated corporate bonds inside my retirement account. Do you think I should sell some of my holdings and buy what he's advocating?
A: No, I don't think you should do that.
The comments to which you are referring were made by Glenn Beck on The O'Reilly Factor television show on April 30, 2009. I have reviewed that segment in its entirety and I have some further insights on this topic from my having interviewed Beck in early March for an article I wrote about Beck and O'Reilly raising concerns about the U.S. government possibly going bankrupt.
On the recent show you watched, Beck first admitted that as recently as the year 2000, he was "broke" and has only in recent years come into money from his syndicated radio show and now his nationally televised cable television show on Fox (previously on CNN). During the segment, O'Reilly pointed out that Beck is currently negative on the economy and "warning people" and so O'Reilly asked him how he is investing his own money.
Beck said that some of his money is in cash and some of it is in Treasuries. "I was in bonds...municipal bonds...but these cities are spending money like water too...so we sold those..." Beck said. I disagree with his logic for dumping municipal bonds, which are issued by state and local governments, and buying Treasuries. If you're worried about the widespread failure of state and local governments, then you should also be worried about investing in Treasuries, which are backed by the federal government. The federal government would not allow the failure of states and if they couldn't stop that from happening then Treasuries are going to be in trouble too.
During the height of the financial crisis late in 2008, municipal bond prices dipped (for example, Vanguard's Long-Term Tax-Exempt muni bond fund dropped about 7 percent) but have since recovered. A 7 percent drop may not seem like much (compared to the stock market's 50 percent bear market drop) but 7 percent is a rather substantial drop for muni bonds over a couple of months. That decline was largely due to panic selling from folks worried about the same issue that caused Beck to sell his muni bonds. Folks who sold during the decline late last year shouldn't have because they missed out on the rebound in muni bond prices late last year and early this year.
Beck also recommended investing in gold. Host Bill O'Reilly chimed in saying, "It's a hedge against disaster to buy gold and everybody should." When the Dow sagged below 7,000 earlier this year, I wrote about investing in gold. I also wrote recently about alternatives to investing in gold for folks who are worried about the possible resurgence of inflation in the years ahead.
When asked about investing in stocks, Beck said, "Are you kidding me?" He went on to say he would not invest in stocks at all until he believed that "...the government is done meddling and we actually have entrepreneurs wanting things again."
When I interviewed Beck in early March and the Dow was around 7,000, he told me that a few months prior, he had predicted that the Dow would slump to around 3,000 to 5,000 but now he was thinking it was going to drop to 3,000. As of this writing, the Dow has rebounded well above 8,000.
Ironically, Beck told me back in March, "No one should be taking financial advice from me. I'm just a self educated guy trying to make sense of things."
So, why then did he go on O'Reilly's popular program, which is the highest rated cable television program in America and has millions of viewers and do a segment just about investing and where he thought the right places were to be?
With all due respect to his media success/talents as a political commentator, I would not take investing advice from Glenn Beck. As best I can tell, he has no relevant background to be offering sound investing or financial advice.