Investing

Investments That Make Battlestar Galactica Look Down-to-Earth

A slight bout of insomnia, a bit of indigestion and there I was at 3 am sitting on the couch, remote control in hand. What I didn’t know was that the four-alarm lamb vindaloo I had for dinner was about to introduce me to a whole new world of riches: Late night television.

The paid programming seems to have more ways to make money than the NYSE has stock listings. And you can stay right there on your couch while you do it. Hard work, savings and diversified investments are not the message.  The Money Men who come on after Letterman and Conan sign off tell you that you can pretty much sit in your Barcalounger and watch the money pile up. No Money Down, and Profit Guaranteed (with an asterisk and some disclaimers, to keep the Attorneys General off guard.)

The ideas they offer to Late Night TV Land are a bit further out in space than  Battlestar Galactica – though it’s late, your mind is mush, and people have been making money on a lot of crazy investments in recent years (Snow futures, nude bungee jumping and the wildly unsavory business of acquiring life insurance options from the terminally ill)

By comparison, the late night pitches I saw sounded pretty plain vanilla. If you stay up past Leno you know them well:

–Invest in cash flow!

–Become a tax lien millionaire!

–Make it rich by helping the government end the foreclosure crisis!

–Grab the money the US Treasury is wasting!

–The internet will make you a dotcom mogul!

–The gold rush is about to start again!

The pitches have taken over channels once dominated by televangelists (who were pretty good at wringing cash from viewers as well.) Fittingly, because the new wave of money-vangelists promise financial salvation from The Church of Divine Investment.

The productions are often slick. The I-made-it-rich–and-you-can-too salesman is polished and personable,  well dressed in dark pinstripes, and he talks straight from the heart, in mellifluous preacherly tones.  The image is not Crazy Eddie hawking insane values, but a folksy well-dressed Main Street banker. Shucks he just wants to share his extreme good fortune, as if Easy Street is getting lonely and he’d like you as a neighbor.

I keep saying “He,” but this is not because there are no women sharing the tube time in the wee hours.  There is usually an attractive and professional-looking woman sharing the set, and she is not just there to be eye candy. Her role is like the “roper” who shills in three-card monte.

On the set that looks like a network late-night television show, she does the “interview” with the Mr. Money Man.  The shill looks more impressed and convinced with every answer she gets to her questions. Hard as you listen, you get no real answers beyond platitudes about how simple and surefire it is.  The plan is teased and unfolded like an onion skin over the entire half hour during which your addled late-night brain is massaged by a lot of Money-Man assurances about how you can be Rich Like Me.

Get rich doing nothing — Guaranteed!

Does anyone besides the Money Man make money on all this? Of course, guaranteed,  and you don’t have to break a sweat.  Instead of busting your butt on whatever it is that made you sleepless in the first place you can get those Guaranteed Returns without working!

You keep waiting to find exactly out how (unless you have finally gathered the energy to reach the remote).  And if you are still awake at this point you at least want to be paid back for all the time you invested and you want them to show you the money.

This means you are ready for the money shot – the People Who Made Millions Using My System part of the show.  Suddenly the TV image is a lot less slick, looking more like the Zapruder film than the studio quality of the rest of the Money Man Show.  In washed-out grainy footage, some gray-faced couple are telling you in somber tones that indeed Money Man has made them comfortably rich with very little effort or brainpower.

But if they are so comfortably rich why do they seem so uncomfortable.  Why are they not happy? Is someone off camera holding a gun to their heads? Could they not stroll onto the Hollywood studio set during their latest shopping trip to Rodeo Drive in Beverly Hills. (My theory: The FTC gives a lot of leeway for quacks to use the airways – but they draw the line at outright lying. These people may or may not be telling the truth – but I’m guessing they would be very hard to find if anyone bothered to check. The film looks as if it has been sitting on a shelf for year – and as we all know the dead tell not tales. Just a theory.)

Finally, after you see the sad success stories, you will get the real pitch. The actual investments come in three categories: 1) Too good to be true 2) Stretching the truth to super size and 3) Extremely overpriced books and materials that deliver conventional wisdom or worse, useless information.

No 1. Too good to be true.

The discounted cash flow offer is one of the all-time favorites. It trades on the myth that once you figure out a secret accounting code you are smarter than the fools who have to think for a living. It reminds me of the Seinfeld episode when Kramer decides to destroy a stereo so he can collect the Post Office insurance.  It’s not immoral, Kramer says, “It’s a writeoff, Jerry.” They have an idiots’ argument bluffing away until both agree that neither knows what writeoff is. The rich investors I know always say that if something seems too good to be true, it probably is. The FTC has busted at least one of these scams.

No. 2. Stretching the truth to super size

Yes, gold is an appreciating asset class these days. You can open any reputable newspaper and learn that fact. But those antique coins they’re hawking on late-night television will cost you a lot more than a standard gold bullion coin, and unless you’re a coin-collecting expert, you have no way of appraising whether there’s any additional value beyond their gold content.

No. 3. Selling promises of riches in overpriced books, videos and classes

Foreclosures are huge problems, we know. We all know that every problem creates an opportunity. True, some people have made money on distressed properties, but there’s no secret involved. The reality: it is a dirty, nasty business that requires hard work, the willingness to throw people out of their homes and a strong sense of the local housing market. It is far from risk-free. If you want to get into that business, hold your nose and jump in. What you really need is a strong stomach, and not a $197 “instruction manual” or a $395 “informational seminar.”

A lot of the offers give money-back guarantees.  But remember,  it’s a lot harder for you to find them than it is for them to find you.  Consumer bulletin boards are full of complaints from people who were overcharged and have trouble stopping payments. The pitch artists know that people eventually give up. Most of us have day jobs, even insomniacs.

RJ Safra is a New York-based writer who specializes in finance and business topics.