The Financial Revivalists: Once Bad For Me, But Now Good For You...And Your Next Egg

Thanks to all the new readers of the past few days. I appreciate the posted comments and e-mails, and I do read all of them.

Since this blog is all about intellectual honesty, I wanted to add a bit to my original post about Social Security and private accounts. Over the past few months, several financial industry pundits have been highly visible in the print and television media promoting the President's vision on this issue. One of them is named Don Luskin. I've seen him repeatedly on a variety of business and political talk shows; he's also a prolific writer about this issue.

When I first saw Luskin on television a few months ago forcefully advocating private accounts, I did a double-take. The last time I remembered seeing or hearing about him previously was several years ago, but I did not remember much about him. A fast internet search brought it all back in a few seconds. For those not familiar with Luskin's past, in 1999 he started a mutual fund firm called MetaMarkets.com. The results were ugly; the company's two funds quickly lost a shocking percentage of investor funds, and had to be shuttered. One post-mortem appears here. Ever the optimist, Luskin blamed his poor performance, according to the article, on "the worst bear market in 50 years, maybe 100 years" but said "it's clear to us we set in motion a revolution that cannot be turned back."

Has anyone asked Luskin how his plan for private accounts would fare if another recession or stock market crash--or several of them--inconveniently appeared? If that happened just as Don was about to retire, would he mind having his personal private account meet the same fate as the funds he managed professionally?

Why is anyone listening to this person? Is this the best that proponents of private accounts can do?

Another example of the hypocrisy that surrounds this issue: Consider the case of the rapidly disappearing campaign fund of Senate Majority Leader Bill Frist (R-Tenn). Judging by the staggering losses Senator Frist's fund has incurred in its stock market investments, one might think he had the misfortune of investing in Don Luskin's funds. The Washington Post dissected this disaster here. According to the article, Frist's investment losses were so severe that the fund was unable to cover a large bank loan. As with Luskin, however, optimism reigns. Linus Castignani, Frist's campaign treasurer, said he was confident that "as the market improves, so will this account" and that he had "full confidence in the market between now and the time we close the account at the end of Senator Frist's term in 2007."

Opponents of private accounts might be justified if they told Frist and Luskin to keep their optimism and retire on it if they so desire; everyone else will take something more certain.

Don't get me wrong. I believe the basic concept of private accounts does have some merit, and hopefully I will discuss that in a future post. But this issue is complicated and contentious enough without proponents of the President's vision conveniently forgetting their embarrassing yet highly relevant recent pasts--and, almost like born-again financial revivalists, believing that given a second chance they can somehow "do better for all of us."

That's not Conservativism. It's intellectual hypocrisy.