Never trust a finance journalist! Ever!

While researching and writing my latest book Pillaged! I’ve had to read the personal finance/money sections of the main weekend newspapers. I noticed a curious coincidence. When a supposedly ‘impartial’ journalist recommended investing in say emerging markets or frontier markets, there would often be an ad for some unit trust working in precisely the markets recommended by the journalist. Yet if you’d followed any of these journalists’ advice, you’d be a lot poorer than you used to be. The big recommendations of the last few months have been Japan, what’s called ‘frontier markets’ (e.g. Egypt) and defensive stocks (large Western companies that pay a decent dividend).

Of course, nobody could have foreseen the appalling earthquake in Japan or the unrest in North Africa. But junketing journalists are often obsequiously keen to recommend the products sold by the main advertisers without mentioning the risks. As for buying large Western companies – last week the FTSE and the S&P were on a p/e (price earnings) ratio of over 20 when the long-term average is around 15 – so they were 33% overvalued. There was only one place they could go and that was down. So never ever trust personal finance journalists – to keep their jobs and pay their mortgages they have to recommend what the biggest advertisers are flogging – and that’s usually a dead horse.