A little over one year ago, I put out this post on my personal LinkedIn (social media) account due to the frustration I was feeling over the shameless marketing tactics used by participants in the cryptocurrency industry. Prices for many of these securities are about half of what they were then, and a number of firms have collapsed due to fraud or just poor business management. Yet, the shameless marketing continues, and solicitations continue to flood my inbox.
Organizations that push products or continually promote “great investment ideas” are out to take your money from you – through sales commissions, management fees, transaction costs or other ways. They are not looking out for your best interest, they are serving their own interests. Advertisements, brochures, or white papers (often disguised as “research”) are all carefully constructed to feature alleged benefits, and downplay or avoid any consideration of risk. In many cases, investment advertising is not much different from online gambling advertising. Marketing materials almost always appeal to emotions, attempting to distract you from logical decision-making. Don’t be fooled. Learn to spot the wolf in sheep’s clothing and avoid companies that are about creating hype.
Here is the full post:
As the Chief Investment Officer of a buy-side asset management firm, I am frequently targeted by salespeople from other asset managers offering investments such as ETFs, hedge funds, or other investable products. Although I find this highly annoying, I usually skim through the information (if provided) hoping that once in a while, there might be something interesting.
Normally, however, it is high-priced, low-quality “investment crap”, that is being offered because it is highly lucrative for the seller, regardless of the value for the buyer.
Increasingly, I am receiving these pitches through LinkedIn connections. So, I will be increasingly vigilant in which invitations I will be accepting going forward.
A warning to others:
In more than 25 years in the investment industry, I have never seen a product marketed more aggressively than cryptocurrencies. Nothing even comes close! Although cryptocurrencies have been around for some time, the frequency of sales pitches to me has accelerated feverishly over the past year or two, and the nature of the pitch has shifted from the benefits of the technology behind it to simply an easy way to make money. And it is not just marketing to me as a Chief Investment Officer (a big fish), I see it being advertised everywhere directly to retail investors (many, many, many small fish). If it is being advertised, there are lucrative profits to be made (again, by the seller, not the buyer).
What started out as a way to complement a fiat currency system, that admittedly has flaws, has turned into a massive investment opportunity? Ask any credible investment manager: currencies (fiat or digital) are not a bonafide asset class! Or, has this become what may end up being the biggest pump-and-dump/Ponzi scheme of all time? The restricted supply nature of cryptocurrency makes it vulnerable to price spikes by creating demand – I think any economist would back that up – and now, the profit-seeking owners, miners and brokers are trying their darndest to push that demand with an unprecedented effort extended all the way to the most unsophisticated investors. Shame on these manipulators – I cannot believe that regulators allow them to get away with this!
I will not be buying any cryptocurrencies for any of my clients, so please stop asking.
Written by James Gauthier, Chief Investment Officer at Justwealth.