As the Republican National Convention wraps in Cleveland and the Democratic National Convention is about to start in Philadelphia, this is a timely opportunity to remind you that you shouldn’t mix your politics and your investments.

Salespeople and product-sales organizations are very astute at selling during political stress. They usually find a hook to sell their products…products that in most cases are not really in your best interest.

As Mike Piper points out in the Oblivious Investor, fear is a powerful sales tool. Salespeople exploit a person’s political views to instill fear and ultimately sell undesirable financial products. Those products are not only intrinsically bad, they come with a huge cost.

The pitch goes something like this,

1. [Political event X] just happened or is likely to happen.
2. As a result, the economy will take a nosedive.
3. You should buy my product to protect yourself.

This strategy is popular because it appeals to people of vastly different political views. To lure in investors with left-leaning views, the pitch evokes a narrative that the markets are rigged by the financial elite. To draw in the right end of the spectrum, the pitch emphasizes over taxation, over regulation, or excess government spending.

The technique is also popular because it can be used to sell just about anything…

• The economy is going to hell, and that’s why you should buy gold.
• The economy is going to hell, and that’s why you should buy my market-timing newsletter.
• The economy is going to hell, and that’s why you should buy this annuity.
• The economy is going to hell, and that’s why you should invest in my hedge fund.

If the fact that someone is trying to play you with a sales pitch designed to sell any product to two contradictory sets of beliefs isn’t enough to drive you away, consider this. For the recommended product to be right for YOU the following conditions have to be met:

1. The salesperson’s political prediction must be right
2. The salesperson’s economic prediction must be right
3. The salesperson’s product must indeed be a good solution to the proposed scenario

Good luck getting all that to be true!

Source: OI

Tony Isola shares ten great quotes from the timeless classic, Where the Customers’ Yachts?:

• Wall Street Greed – “At the close of the day’s business, they take all the money and throw it up in the air. Everything that sticks to the ceiling belongs to the clients.”  Merrill Lynch Structured Notes, anyone? Yes, the customers got to keep 5%.
• The Value of Market Predictions – “It seems that the immature mind has a regrettable tendency to believe, as actually true, that which it only hopes to be true.” 90% chance ‘Remain’ wins the referendum… OOPS!
• Financial Salesman Having an Answer to the Unanswerable – “Now if you do someone the single honor of asking him a difficult question, you may be assured that you will get a detailed answer. Rarely will it be the most difficult of all answers – ‘I Don’t Know.’” Market pundits who were completely wrong on Brexit, telling you what to do now.
• Data Mining and Confusing Causation with Correlation – “There have always been a considerable number of pathetic people who busy themselves examining the last thousand numbers which have appeared on a roulette wheel in search of some repeating pattern. Sadly enough, they have usually found it.” Long-term capital management had it all figured out, until they didn’t.
• Valuing Paper Trading, or Simulations, over Real Life Experience – “Art cannot convey to an inexperienced girl what it is truly like to be a wife and mother. There are certain things that cannot be adequately explained to a virgin either by words or pictures.” Trading Academies advertised in the media will make you rich like the Trump University graduates who are now real estate moguls.
• The Value of Individual Stock Picking – “They told me to buy this stock for my old age. It worked wonderfully. Within a week I was an old man.” Kittens and monkeys throwing darts routinely outperform stock pickers.
• The Aversion to Holding Cash in Clients’ Accounts – “To them having a sizable cash balance in an account for any length of time is unbearable. Suppose stocks should go way up? They would be left high and dry with nothing but some dirty money.” Money markets give you nothing. MLPs work as bond substitutes; they will provide a terrific yield with little risk.
• Churning Clients’ Accounts – “The man who chooses to take his money and churn it furiously either below or above Chambers Street, cannot in any way predict his fate, save for a single assurance. So long as any of the money still clings to the sides of the churn, he will not be bored.” Managed mutual funds have an average turnover rate of approximately 85% and underperform the markets basic indices.
• The Folly of Choosing Market Beating Funds – “The subject of choosing profitable financial investments does not lead itself to competence. There is almost no visible supply. If there were, it would have been discovered long ago.” The odds of an individual investor in 2016 picking a fund ahead of time, that will outperform the market over the next decade, are close to zero.”
• Chasing Hot Stocks – “The pathetic fallacy is that what are thought to be the best are, in truth, only the most popular – – the most active, the most talked of, the most boosted, and, consequently, the highest in price at that time. It is very much a matter of fashion, like Eugenio hats or waxed mustaches.” Ten stocks to buy right now!

Source: TM

NorthStar Capital Advisors would like to take this special occasion to thank you, our loyal clients and friends, as Sunday we celebrate 10 years of financial planning and investment management. We have come a long way since we rolled out our objective and disciplined approach to investing in 2006. Our success is attributable to clients and friends who faithfully support our business and receive great service and advice in return.

We deeply appreciate your loyalty, support, and trust over the past 10 years. We hope you and your family have a safe and happy holiday!

With heartfelt thanks,
Chris Mullis, Jimmy Irwin & David Berger