The Problem with Altucher

I am apparently in an internet feud with Jim Altucher. It is true that I started it by writing a blog post criticizing Altucher for questioning Buffett's motives for writing his acclaimed oped, "Stop coddling the Rich." It was not my intention to turn that blog post into a full blown feud. I even changed the title to accommodate his wishes not to be embarrassed in front of his children.

Like most of the country, I have been disgusted with the debt ceiling limit talks. When patriotic Americans like Buffett, who can influence the debate, came forward with a suggestion, I wanted to see his argument attacked on the merits not innuendo. For example, I loved Mike Arrington's brilliant analysis of Buffett's proposal on Techcrunch. Arrington argues that the rich support raising income taxes because they do not want to take a chance that the government could impose a tax on their already accumulated wealth. His expostulation convinced me that a property tax similar to Pennsylvania's might be the answer.

I read with great interest Charles Koch's opposition to Buffett's proposal in the National Review. He argued that he could allocate his wealth more efficiently than the government. Koch's reasoning gave me pause. Who can really make a case for the government's efficiency?

In the end, I could not support his contention. The Koch Brothers have donated more than $600 million to cancer research, the arts, and a private school. This is certainly generous. But I have to wonder who is going to pay for poor children's education, build roads, and prosecute crime if we do not tax?

While I do agree with Altucher that Buffett probably has an ulterior motive for urging the government to raise taxes on himself, I think he is dead wrong in suggesting that it is because it will make it easier for him to sell his holdings. His post annoyed me because it was factually inaccurate. In addition, I have always found him to be an irresponsible financial journalist.

I know many people including my mother and friend Linda that have been financially hurt by taking his advice. For a while I tracked his stock suggestions in 2010, I found that they fell more than 39% during a period of great market volatility. Very few of his suggestions were defensive in nature or were risk adjusted. A sophisticated portfolio should not be consist entirely of high fliers.

I did send him my original blog post because I wanted to understand why he kept giving out capricious stock advice even though he is losing people money. Not, as he alleges, because I was looking for readers. Over 800 people have read the original post.

Altucher's answer was one that I would expect from a feckless carnival barker, but not from an accountable financial adviser. I quote directly from his email, "As for stocks: PIP, CIGX, DNDN, GNW, and on and on have been good picks for my investors and readers (up 100s of % at some pt after article).

Altucher touted his winners and simply eradicated from memory the ones that did not perform as well. This is too "Paycheck" or "Eternal Sunshine of the Spotless Mind" for me. A professional would have sent a track record of all his recommendations or at least included some losers.

Altucher accused me of having a personal beef with him. It is absolutely not true. I feel the same way about Jim Cramer. I can not believe he is still on the air after recommending Bear Stearns right before it imploded and had to be acquired.

It is very hard to give one size all investment advice over the internet or television. Maybe commentators should not be able to ballyhoo without first encapsulating their entire track record.

Altucher's Buffett Logic is All Wet

I do not understand why anyone on Wall Street still pays attention to James

Altucher. While many of his stock advice columns are beautifully written, they are not worth the paper that they are written on. Whenever I have bought a stock on his recommendation, it has moved dramatically - down. In the stock advice media wars, it is a race to the bottom between him and Jim Cramer.

This week, he decided to attack Warren's Buffett for a penning a thought provoking oped about taxes for the New York Times. Buffett wrote in the editorial titled, "Stop Coddling the Super-Rich," that he only paid 17% of his income in taxes, while his staff averaged 36% tax rate. Altucher is correct that Buffett has said this many times in the last 10 years. The thoughts of the third richest American bear repeating during a period of unprecedented turmoil. Buffett's words may provide cover to Republicans, who pledged no tax increases, if they decide it is best for the country to raise taxes.

This section of the editorial provides the most compelling arguments that raising taxes may be best for the country.

I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.


Buffett's first point is that no one stops making good investments because of the tax rates. As a stockbroker for over 25 years, I have found that is true. His second point in the paragraph is that the lower tax rates since 2000 have not resulted in more jobs.

If Altucher had attacked Buffett on his economic analysis, I would have stayed quiet.

He decided to attack Warren Buffett's patriotism. According to Altucher's convoluted thinking, Buffett did not write this oped piece for the good of the country. The "Oracle of Omaha" urged the raising of taxes so that owners of stock would be less likely to sell, therefore, making it easier for him to sell. Besides being ridiculous, his argument is factually wrong. While it is harder for anyone with a large block to sell when there is bad news causing a stock to drop, Buffett almost never sells on such a day anyways. For example, he waited years to sell his Salomon Brothers after the bid rigging scandal.

While many dismiss attacks such as Altucher's as noise, I worry that it will inhibit others from participating in the debate. If the country is going to move forward, we need all the help that we can get.

I can only assume that Altucher is jealous that no matter how often he writes, he will never receive the attention that Buffett gets for one oped.