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Politics and Investing Don’t Mix

Fear is a powerful sales tool.

A sales technique that I’ve seen more and more of recently is the exploitation of a person’s political views in order to instill fear and, ultimately, sell undesirable financial products. 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.

The technique is popular because it’s effective.

The technique is popular because it can be used to appeal to just about any set of political views. (To appeal to people with left-leaning political views, the pitch is typically something to the effect of the market being rigged by the financial elites. To appeal to people with right-leaning views, the pitch is often about over-taxation, over-regulation, or excess government spending.)

And the technique is also popular because it can be used to sell just about anything. For example:

  • 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.

The fact that this approach can be used to pitch just about anything — as well as the fact that it can be used to appeal to either of two directly contradictory sets of beliefs — is precisely the reason you should never trust it.

In order for the pitch to work out well for you, the pitch-person has to get their political prediction right, they have to get the resulting economic prediction right, and they have to be right (and honest) that the product they’re pitching is indeed a good solution in a scenario in which the economic prediction turns out to be right.

That’s what’s necessary in order for it to work out well for you. In order for it to work out well for them, they just have to convince you to buy in the first place.

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