Ramsey and the Three Wise Monkeys

https://finance.yahoo.com/news/father-moron-dave-ramsey-disgusted-211016354.html

This is a somewhat confused report of an Instagram video in which a father and daughter share a financial scheme with the audience. Engaging in a practice known as arbitrage they are effectively borrowing money at a low rate which generates savings that allows them to lend and receive a return at a higher rate. The particular scenario isn't very convincing and certainly has some holes. As far as risk, there's always risk in such ventures.

Now I could criticize this kind of financial transaction as usurious but Dave Ramsey cannot as he fully supports the concept as legitimate and moral. However, he flies into a fury over this transaction and resorts to his normal crude mannerisms and masked profanity.

And yet I am truly mystified as to why he's so upset. He apparently understands very little of how the US financial system works - a system that he is invested in, endorses, and purports to teach.

What he's condemning in such strong terms is basic to speculators and high-risk/high yield portfolios usually associated with hedge funds. The father-daughter in the example may (or may not) be foolish as per Ramsey's economic worldview - which has nothing to do with Scripture. I would say it's formed by the Enlightenment but I'm not sure that would even apply to the likes of Ramsey - who (it would seem) has made his fortune through cunning and (by all accounts) exploitation. Theory is not his strong suit.

While I certainly dislike Air BnB's and wish my jurisdiction would ban them, his statements are too sweeping and broad in their scope. I have often found this to be the case with him and I think he loses credibility as a result. To be fair, he never had any in my book to begin with. It's one thing if he's just a Dr. Phil-type financial advisor, as obnoxious as that is. But he presents himself (falsely) as a Christian dispensing Bible-based financial wisdom and though it is repellent to contemplate, there are churches that use his materials. As such, I take grave exception to him and his un-Christian views regarding wealth.

Given that hedge-funds use arbitrage regularly, his 'millionaire' statement is completely erroneous. He doesn't seem to know what he's talking about.

My own father made millions by accumulating properties on the cheap, fixing them up and while he did 'flip' them sometimes, often he would 'trade' them, utilizing their value in complex transactions involving multiple properties, and sometimes cars, boats, and the like. It's a similar concept - exploiting the difference in markets and values by means of simultaneous exchange.

It's not ethical as he was not looking out for the others with whom he did business but rather relied on their greed and frequent failure to pursue due diligence. If you know anything about real estate in the American venue and the concept of 'comps' or comparables, there is a degree of subjectivity at work in this process. He would manipulate it in the same way other businessmen manipulate prices, fees, and the like. He would selectively use comps to inflate the value of his properties. His attitude was that if other people didn't back-check his work and verify his evaluations, then it was their fault. Caveat emptor. Was he breaking the law? No, not man's law but it was unethical and all rooted in exploitation for the sake of profit. And eventually his greed led him to overreach and it destroyed him.

This was back in the 1980's and he certainly looked up to the likes of Donald Trump and in that heyday of ostentatious consumption and glorified wealth (how tame it seems now), he was also looked up to and people regularly approached him, begging to learn how to do it. One of his secrets (which is no secret to many investors) is that he didn't use his own money. He used investors to make the purchases, paid them high dividends but still pocketed the lion's share himself.

He'd put together a deal, get investors to give him the money for it, move a bunch of stuff around often with multiple parties involved - apartment buildings, houses, cars, boats, vacant lots, and so forth and then make a pile of money, pay off the investors and walk away with his pockets full. He never really did anything nor spent any of his own money. It was salesmanship, the ability to sell himself and get people to trust him and of course the capacity to put together the deals and keep it all in his head. People that know me are often impressed by my ability to crunch numbers on the fly - in my head. My father (who was a high school dropout) could run circles around me.

There were a lot of judgment calls about values, financial structuring, whether to spend some money to fix up a property and things like that but all he did was pull the strings and manipulate the situation. He had overhead of course, an office with brokers to reel in the investors, a real estate agent on staff, a property manager, bookkeeping, a receptionist and the like. He had to pay to keep all this running too.

It would seem that Ramsey the millionaire has a rather limited capacity in understanding how capitalism works, how the markets work, how risk itself is used to make money. There are a lot of people like him - successful (as the world sees it) and yet never really thinking that deeply about how it all works. He operates on one level and because he's gotten rich, and he's convinced he's a brilliant self-made man, he tends to look down on others who actually know more about the system and are willing to work it.

He thinks such transactions and risks are stupid. I agree and that's why I would apply the label to the whole system and to him as well. And in reality it's not stupid per se, but stupid (or rather, foolish) in its immorality and ethical bankruptcy. It's not an honest way to make money. It's not a Christian way. But the same condemnation applies to Ramsey.

Ramsey advocates 'consistent investing' - what a hoot! He doesn't understand that the companies and funds he invests in are relying on these methods to make money and are plugged into a system that has normalized them. Does he think that a leveraged buyback - when a company uses debt to buy back its own stocks in order to drive up their value for a quarterly report is stupid? So do I, but all these 'consistent investors' benefit from such price and value manipulations. What about debt loading - when companies gobble up smaller assets, load them up with debt and then do a dividend payout or get rid of debt through bankruptcy? This could go on for pages and pages. Consistent investing (as Ramsey sees it) is a case of the Three Wise Monkeys - no see, no hear, no speak. Ignorance is bliss. Ramsey isn't in to all that 'stupid' stuff and yet the 'consistent investors' he advises are handing their money over to a system that relies on these tools for its bread and butter. The old 'just work hard and save your pennies' bit is not applicable to the stock market. That's a fantasy.

It works for individuals saving their money in a coffee can but of course their savings are canceled out by inflation. The bottom line is - don't waste your time and your life worrying about money. It's all dust in the wind. It's a wicked system and only the wicked will flourish in it - only those who play by its rules and sell their souls to it.

And to suggest that compound interest is important or somehow 'normal' reveals his ignorance of both doctrine and history. Compound interest is a kind of magic or alchemy and as such was always condemned by the Church until the sheer power of the Italian city-states during the Renaissance began to chip away at it. For at least two centuries battles over the issue were fought in both Roman Catholic and Magisterial Protestant traditions. It was only with the Enlightenment, liberalism, and the economic system it produced did usury win the day. People were fooled into thinking it was scientific and thus a law of nature that could not be argued with. Even if that were the case, a sounder Christianity would have understood that nature is fallen and as such is somewhat unreliable for determining such questions.

In the American Enlightenment 'common sense' context it became not just social and economic orthodoxy but theological as well and this was all but carved in stone during the 20th century as a counter to communism and its narratives.

The end of the article seems to walk back some of Ramsey's statements. It's almost as if there are two sets of ethics - one for professional investors and one for the public. If that's so, then Ramsey needs to apologize to the father and repent of his words. The made-up boundary that separates the two is arbitrary and subjective. If such practices are okay on one level, then he cannot say that they're wrong for a regular person - let alone a 'consistent investor' who simply relies on others to engage in such practices on their behalf.

Besides, caveat emptor is the motto of the system - right? Wouldn't Ramsey say something juvenile at this point like 'That's the way it is, baby!' I certainly have endured such 'brilliance' while listening to him on the radio.

I urge all Christians to have nothing to do with arbitrage and to in all cases and scenarios eschew the advice and unbiblical teachings of Dave Ramsey. In this case, it's not so much that's he wrong but that he's ignorant and mired in self-contradiction, it's safe to say he's not worth listening to. If your church is using his materials, then you might re-think your attendance there. Your leaders are hirelings and fools.