Every once in a while a new word or phrase is coined that becomes accepted in the financial vernacular. With the rapid evolution of internet investing, on-line financial journalism, and stock bulletin boards, Investor Home believes the time is ripe to officially recognize and offer a loose definition for the term "Investment Pornography" (or "Financial Pornography").
Two respected investment professionals are credited with coining the phrase, although it's not perfectly clear which began using the term first. It is clear however, that both
Rex Sinquefield of
Dimensional Fund Advisors and columnist
Jane Bryant Quinn have been using the terms for many years. And recently half a dozen or more journalists and professionals have also started using the terms regularly. The phrase is even listed at the
Word Spy Web site which highlights recently-coined and interesting words and phrases. Paul Merriman also does entire seminars on the topic of "How to Protect Yourself from Investment Pornography."
So what is investment pornography? There is no precise definition and some people disagree on what exactly qualifies as investment pornography, but let's start with one of
Webster's definitions of "pornography."
Pornography: The depiction of acts in a sensational manner so as to arouse a quick intense emotional reaction.
Jane Bryant Quinn has offered a number of explanations for the term in various articles (see also Newsweek, "The Big Tease" 8/7/95).
You know the stories: The Top Ten Mutual Funds to Buy Now, How to Double Your Money This Year, personality profiles that read like fan magazines. Stock-touting pieces that praise any path to profits. We've all done these stories, in one form or another. It's investment pornography -- soft core, not hard core, but pornography all the same.
When Business Writing Becomes Soft Porn from
Columbia Journalism Review (March/April 1998)
When asked about the term in an August 1998 interview with
abcnews.com titled
Good Investing Isn't Sexy, Quinn responded with the following.
I was getting at the newspapers and magazines that make investing sound easy. "Three ways to double your money." "Ten hot stocks." The articles that make it sound like the journalist knows the right stocks or mutual funds to buy. And the fact is we don't know. Journalists don't have any business pretending they're investment analysts. We can talk about stocks, investment ideas and what people are saying. But journalists shouldn't say that certain stocks will increase in value. Nobody knows. Soft-core though, the Net is hard-core.
Columnist
Humberto Cruz offers a similar summary.
I call it financial pornography. It titillates and excites but gives no lasting pleasure. Succumb to it, and it could actually be hazardous to your financial health. I am talking about all those alluring cover headlines from financial magazines, all the "hot tips" from the supposedly market experts dispensing their eagerly sought but often contradictory advice all day long on cable TV. Not to mention the thinly disguised infomercial in which some financial planner buys air time from a radio or television station, then spends half the show asking listeners and viewers to call his office for an appointment.
Financial pornography preys on unwarry investors in the
Sun Sentinel (10/7/96)
In his on-line book Investment Strategies for the 21st Century, Investment Advisor Frank Armstrong also presents an opinionated discussion of financial pornography (including the following excerpt) along with a small collection of Financial Pornography clips from Weston Wellington's (VP at Dimensional Fund Advisors) collection.
America is, after all, notoriously tolerant of crackpots. But an examination of the rest of the popular financial media turns up little else of value, little intelligent life at all. In fact, most of what the popular financial media puts out could properly be called financial pornography! It's not only bad for your wealth, it has no redeeming social value.
All The Wrong Stuff: Financial Pornography
If we make some small modifications from Webster's definition of pornography, we can offer the following loose definition.
Investment pornography: The depiction of investment and/or financial information in a sensational manner so as to titillate or arouse a quick intense emotional reaction.
So how can we identify and avoid financial pornography? Cruz suggests ignoring "any headline with the words hot, safe, today or now in it or any variation thereof, such as hottest or safely. That should eliminate 82.6 percent of magazine cover headlines."
An interesting question is why do we see so much investment pornography? Perhaps Fortune Magazine provided the answer in an article (dated 4/26/99) authored by an "Anonymous FORTUNE Writer." In
Confessions of a Former Mutual Funds Reporter, the writer acknowledges that "we [Fortune] were preaching buy-and-hold marriage while implicitly endorsing hot-fund promiscuity." Why would Fortune do that? According to the article, "Unfortunately, rational, pro-index-fund stories don't sell magazines, cause hits on Websites, or boost Nielsen ratings." Would you believe the lead article and headline splashed in bold letters across the cover of Fortune's next issue on 5/10/99 was "Addicted to Sex"?
You have to give Fortune a lot of credit. At least they confessed to doing it and told us why they do it. The reality is, we should expect the investment pornography to keep coming as long as investors keep reading it. Of course, now that individual investors can produce their own investment pornography in chat rooms and bulletin boards on the net, the periodicals may have to produce even more of it just to keep up.
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