MSN Money’s James Scurlock published an article on Tuesday entitled “Stop Listening to Suze Orman.” I have to thank him for putting into words a sentiment that’s been brewing in me for a long time.

I will admit that my first exposure to Suze Orman was positive. Those “super simple mantras” that Scurlock mentions do initially point one toward fiscal responsibility. Even Scurlock praises her 2001 book The Road to Wealth as “comprehensive and useful.”

But I would venture the guess that the Suze Orman franchise has, like the Fonz, jumped the shark.

When Super Simple Goes Too Far

I think I started to lose faith in Suze right about the time I read Women and Money. Here’s what I wrote in my Livejournal about it, many moons ago:

On the other hand, If you like Suze Orman, and have already read The 9 Steps to Financial Freedom, stop right now, because everything she says in the first book is said again in Women and Money, only about eight grade levels lower. I think she makes the mistake of thinking that if women are ignorant about money, this means that they are really sloooow. Take her explanation of IRAs, for example. She never really explains why someone should have a Roth IRA versus a traditional IRA. She basically says that, “You have more flexibility with a Roth! And you pay tax up front! So your $200,000 at retirement doesn’t become $150,000. So fund a Roth! It’s unequivocally the better option!” Uh… While there are good reasons to pay into a Roth versus a traditional IRA, she doesn’t explain that the primary deciding factor in choosing one is what you expect your retirement income to be – which I think is a frightening omission.

Besides the fact that I felt patronized by the entire tone of that book, the discussion of retirement planning took a complex issue and made it unfortunately simple. I suppose, if you’re the kind of person (male OR female) who hesitates too much over any decision, putting money in a Roth IRA on Suze’s blind advice is better than not saving anything for retirement. But, unfortunately, Orman tries to simplify things that have no business being simplified further:

“But it is not Suze’s hypocrisy or even her intellectual laziness that really bothers me;” Scurlock writes, “no, that would be something Suze ‘loves’ called ‘dollar cost averaging,’ which involves buying the same stock over and over again as it falls.”

Okay, now Scurlock is simplifying (or rather, misrepresenting) the definition of dollar-cost averaging. Quoting About.com on on dollar-cost averaging, “Dollar cost averaging is a technique designed to reduce market risk through the systematic purchase of securities at predetermined intervals and set amounts.” DCA is a basic precept of value investing, embraced by financial analysts more respected and reliable than Orman, too – such as Benjamin Graham, the author of the classic The Intelligent Investor, and one of Warren Buffett’s greatest influences.

… with a proviso, that is: that you are never paying more than a particular security is worth. This is something Orman ignores; perhaps because it is very hard for the average person to know if they are paying more for a stock than it is worth. Graham handles this with a 500+ page book on how to value stocks; Suze Orman stops there.

So Scurlock is right that Orman’s techniques are too simple for something which is inherently complex – the stock market – and that it is likely to lead her readers to “buying the same stock over and over again as it falls,” but that’s not a fundamental part of DCA any more than puppy mills are a fundamental part of having a dog.

Blaming the Victim

Scurlock writes of Orman, “She has less patience for statistics. Although study after study has shown that personal bankruptcies are caused primarily by catastrophic events like divorce, job loss and, above all, medical bills, and that most of us are struggling with a gap between our income growth and the soaring cost of necessities like housing, Suze tends toward psychological causes that invariably blame the victim.”

Absolutely true. Telling us to not run up credit card bills is one thing; but it ignores the basic economics conditions that actually cause insolvency. In reviewing The Two-Income Trap I talk about these in greater depth; how rising costs but lagging salaries have created a perfect storm for the middle class. Additionally, a 2005 study by Himmelstein, Warren, Thorne and Woolhandler published in Health Affairs suggests that up to 55% of bankruptcies have a medical cause – over two million Americans annually.

And Downright Duplicity

One thing we all can say about Suze Orman is that she hates leasing cars, right? I remember an episode of Kathy Griffin’s reality show My Life on the D List where she invites Orman to give financial advice to her staff. Orman then proceeds to go off on one of those staffers for leasing a car. (Oh, how I wish I could find this video, but apparently all Youtube wants to show me is Kathy’s crush on Anderson Cooper).

Well, apparently Orman only thinks leasing is bad if she’s not getting a cut of the profits. Scurlock points out one of Suze’s biggest contradictions:

She has also hawked for GM, claiming that leasing a luxury car — you know, the kind that people drive to impress other people — is a terrific financial decision: “If you ask me, that’s smart money!”

In Closing

“Her previous book promised us that we would never be financial victims again,” Scurlock writes. You know who else says that? Abusive boyfriends.

In the immortal words of Dan Savage, DTMFA.

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