George Gilder: So THAT explains it

Tuesday, May 09, 2006 | 07:15 AM

The Gilder effect, as it was known in the late 1990s, was what would happen when George Gilder's newsletter would recommend a stock, sending its share price surging to absurd levels. By absurd, I mean even relative to those heady dot com, bull market days.

By the late 1999/early 2000, we used to reliably fade (Short) Gilder picks after the first or second wave. It had to be done by scaling, cause you never knew how high these absurdities would run. But they eventually came crashing back down to earth. Many of them subsequently went bankrupt.

The key tell that his newsletter was a house of cards was that even Gilder himself would note that "He doesn't do price." When you consider how utterly absurd that is for an investment newsletter, you can understand how totally out of hand things can get.

Gilder's subscribers got utterly devastated in the crash: At one time, over 75,000 subscribers paid him good money for his picks; Today, fewer than 5,000 people subscribe (still a respectable number). Quote GG:  "The trouble with my business is that everyone came in at the peak. The typical Gilder subscriber lost all his money and that made it very hard for me to market the newsletter." Gilder's saving grace was he ate his own cooking, investing right along side his readers. The WSJ reports  he "was as close to bankruptcy as you can get without filing."

I never liked Gilder's approach or his "priceless picks," and I just found out why: He is a rigid idealogue. That's a guaranteed recipe for stock market disaster.

How idealogically rigid is GIlder? Consider:

-He is a zealous advocate of "intelligent design;"
-He believes evolution is a myth;
-He helped found the Discovery Institute;
-He was an early proponent of supply-side economics;
-He was outspoken critic of women's rights in the 1970s;
-He was a former Nixon speechwriter.

Even Gilder himself admitted "I did not put the companies through a rigorous financial test or filter. It was a real disaster. I was a naïve guy doing this. It almost didn't matter what the hell I did when all the companies went bankrupt, there is no way to look good."

No shit. That's got to be the understatement of the year. Additionally, it is horrifically irresponsible.

But understand my takeaway from all this; It isn't about politics -- its about being intellectually flexible and being able to adjust your thinking on the fly. Gilder is the poster boy for the opposite of that. Is it any surprise his  readers and investors got demolished? They got suckered in at the top by someone who was unqualified to give financial advice.

What's even more astounding is that there are still 5,000 people who continue to pay him for his "insights."

Where Are They Now: George Gilder
WSJ, May 8, 2006

Tuesday, May 09, 2006 | 07:15 AM | Permalink | Comments (49) | TrackBack (2) add to | digg digg this! | technorati add to technorati | email email this post



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» George Gilder - Telecosmic from Nyquist Capital
The Wall Street Journal published a biographical article (free till May 10th) on George Gilder, one of the chief exhalers that inflated the optical bubble of 1999. I mentioned Gilder last week in my first post on Wintegra (WNTG). He has consistently sp... [Read More]

Tracked on May 9, 2006 11:14:34 AM

» Forbes vs Peter Schiff: Petty Smackdown from The Big Picture
Forbes magazine: Herein is a formula for making a lot of money as a money manager. Have a shtick, get known, wait for your sector to get hot. In the 1970s James Dines acquired fame and fortune by being a gold bug. In the 1990s George Gilder minted mone... [Read More]

Tracked on Feb 22, 2008 7:06:58 AM


Great post...At my work place we had a few 'Gilder' followers and they would be saying - Made 100 percent this year and got rich fast YET they are all still working as my conclusion was retained wealth is the key. These are same people working the bubble sphere on real estate this year or perhaps shrimp farming next year.

I read the WSJ piece and it reinforces with me 'protect thyself' and get the facts, use data and analysis and understand for yourself prior to investing. Also, if the return and promise is too good to be true, then it is.

Posted by: John | May 9, 2006 8:00:45 AM

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