By Josh Katzowitz, WCI Content Director
Social media is pretty much the worst. I feel like I have to be on X (Twitter) and Facebook for my job (and I spend plenty of hours a week on both), but I also sometimes find myself addictively doom-scrolling at the end of the day, watching Instagram reels or scrolling through YouTube. I kind of hate that about myself. Why can’t I just read a good novel that will bring me to another time and place or peruse a financial book that will finally convince me to start investing in real estate?
While I avoid TikTok, there are plenty of physicians making quality content on that app, helping fight misinformation, spreading helpful advice, or simply bringing good cheer to their millions of followers. But there’s also plenty of advice, particularly financial advice, that is mortifying and dangerous on social media platforms. Some of it is also laughably bad.
Today, in the name of avoiding bad advice and shining a light on the people who are giving it, let’s take a look at a few social media clips that might just blow your mind.
Can you spot the horrendous advice in the social media clips to follow (I bet you can!)? [Profanity warning on some of the videos.]
The Take-Out-Credit Cards-and-Then-Declare-Bankruptcy Idea
Ah yes, fraud for beginners. pic.twitter.com/SU6JEAVeXH
— TTI (@TikTokInvestors) June 21, 2023
Yeah, maybe don’t commit fraud by obtaining a business credit card for the sole purpose of not paying it off and then thinking it won’t affect you personally.
As the Motley Fool pointed out, “This is also fraud, and to make it even worse, it's blatantly obvious fraud. Credit card companies and bankruptcy courts know what they're doing. They aren't going to be fooled by such a basic scheme.”
In a subsequent video, this TikToker said his initial scheme was all a big joke and that he was actually trolling another TikTok user when he posted his video (which he also deleted). Maybe he was lying and then telling the truth. Or maybe it was the opposite. Who knows? But I imagine not every one of the millions of people who watched him brag about his “$100,000 watch” while chilling in a pool saw through the ruse.
This is probably the most stupid financial advice I’ve ever seen on TikTok, but that doesn’t mean people won’t think it makes perfect sense.
More information here:
The Car-Loan-into-an-Airbnb Idea
Wait, so a teenager, who we assume does not have a high-paying job and a nearly non-existent credit history, can walk into a bank and get a car loan for a low interest rate? That she can then use to put down a minimal amount on a short-term rental property? And then she’ll make a 14% percent profit on her Airbnb rental?
BOOM! None of that makes sense. There’s no way in the world this scenario actually happened in this way. Maybe her dad co-signed the loan. Maybe her father owns an Airbnb. Maybe he’s making money (or in this current real estate climate, maybe he’s not). Maybe he just told her what to say and then BOOM! A word like “arbitrage” came out of nowhere.
Which scenario sounds more likely to you?
The Start-an-S Corp-and-Avoid-All-Taxes Idea
As we’ve discussed in the past, there are tax incentives to starting an S Corp for your business. As Dr. Jim Dahle wrote in 2018:
“If the corporation makes an S declaration, it is no longer subject to the corporate level of taxation and becomes a ‘pass-thru entity.’ That means the taxes are passed through onto the corporation shareholders' individual returns. There is still a corporate return, but there is no payment made as a corporation . . . The main benefit of paying yourself as much of the corporate income as distribution as possible is that you don't have to pay payroll taxes (i.e. FICA, Self-employment or Social Security and Medicare taxes) on the distributions.”
Yes, an S Corp can lower your self-employment taxes, depending on the salary you pay yourself, but this TikToker is not saying that; it seems like she’s kind of claiming you don’t have to pay taxes at all. The IRS, of course, would be interested to know what that’s all about. And the line about the one corporate vacation a year? Yeah, I have no idea where that came from. As one tax attorney told Vox, the video is “wrong on so many levels, I don’t know where to begin.”
The Write-a-Letter-to-the-IRS-Saying-You-Don’t-Want-to-Pay-Taxes Idea
TikToker Bree with the account Six Perceptions of Love has an interesting idea to reduce how much you pay in taxes. Send the IRS a certified letter saying that you’re not going to pay taxes anymore because you’re “non-taxable.”
While she admits that US citizens must pay taxes, she apparently doesn’t consider herself a US citizen. Instead, it appears she wants to be a so-called “sovereign citizen.” As the Southern Poverty Law Center says, “Sovereign citizens believe they are not under the jurisdiction of the federal government and consider themselves exempt from US law. They use a variety of conspiracy theories and falsehoods to justify their beliefs and their activities, some of which are illegal and violent.”
Bree calls herself a “living woman,” which I guess takes the place of her being a US citizen and which leads her to believe she is non-taxable. As The Conversation notes, sovereign citizens believe that they can avoid being “oppressed by the government” and avoid paying taxes and fines by calling themselves a “living person” or a “natural person.”
If you’ve ever seen an online video of a sovereign citizen trying to assert that to an authority figure (like a cop or a judge), it never ends well for the citizen. Or as this X user responded.
Messing with the IRS? pic.twitter.com/zFYdXKPtH3
— John Ward (@jwflame) September 7, 2023
Anyway, Bree says in a subsequent video, “I am not a teacher. I am simply sharing my experience as I experience these things.” In a different video, she says, “A good rule of thumb is do not take advice from people who you do not know on the internet.”
Sounds good to me. Also, don’t listen to supposed sovereign citizens for financial advice (or, come to think of it, for anything else).
More information here:
The Become-a-Millionaire-Over-the-Course-of-a-Pregnancy Idea
This is the best advice I’ve seen so far.
Wealth is easy bros. pic.twitter.com/5P9BN4srQt
— TTI (@TikTokInvestors) October 11, 2023
If you search hard enough, you can find smart advice on TikTok (aka FinTok or StockTok) or on YouTube and Instagram. I have little doubt about that. But we know that, if you frequent social media sites more than you should, it’s so easy to find and be influenced by the bad actors there. The bad advice, after all, can just show up in your feed.
According to a 2023 survey by Betterment, via CNBC, 65% of Gen Z and 55% of Millennials get advice from social media. Research from The London Academy of Training shows that 49% of people between the ages of 16 and 35 say social media advice has influenced their financial decisions.
“With the rise of technologies like deep fakes, relying on social media for advice makes people vulnerable to scams, phishing, and risky financial decisions,” Margaret Doyle, the chief insights officer for financial services at Deloitte, told City A.M.
Or as Josh Brown, the CEO of Ritholtz Wealth Management, told Vox: “I love the content, but people should not invest on the basis of a TikTok video. People would be better served reading books than following TikTok gurus on trades.”
(Psst, here are a bunch of books that might help. Make sure to read those instead of scrolling social media long after you should have been asleep in your bed.)
The WCI Fund 2023 Q3 Update
Stocks had a rough third quarter, and unsurprisingly, neither VTSAX nor FSKAX fared well. But both did much better than the WCI Fund (WCIF)** (the quasi-index (and completely made up) fund composed of the individual stocks picked by WCICON23 attendees). In Q3, WCIF got smoked.
As you can see in the chart that compares WCIF to the total stock market funds from Vanguard and Fidelity.
One of the biggest problems was Masimo Corp.—a global health technology company that fell 46.7% in Q3, likely because of a class-action lawsuit that was filed that alleged securities fraud.
Disney CEO Bob Iger had a bad quarter, flippantly talking about the writers' and actors' strikes and musing about the possibility of selling ABC and ESPN. Disney stock fell 9.3% in Q3. Target stock plummeted nearly twice as much. And what’s the opposite of the word “skyrocket?” Whatever it is, that describes Chewy stock (down a whopping 53.7% last quarter) after the company warned “of difficulties from a cost-cautious consumer.”
As Nick Maggiulli of Of Dollars and Data wrote, “Only 25 companies are responsible for the 12% year-to-date gain in US stocks” through the end of Q3. Since WCIF doesn’t use any company that’s in the top-10 of VTSAX or FSKAX, it’s safe to say that most, if not all, of those 25 companies sit outside of our fund. In other words, the stock market might be weaker than the index funds suggest, meaning WCIF isn’t as bad as it seems.
Or maybe, you know, trying to pick your own quasi-index fund will end up having disastrous results. Here’s looking toward Q4. I shudder to think what will happen.
[Founder's Note from Dr. Jim Dahle: WCI has not officially lent its name to Mr. Katzowitz's crazy idea for a “fund.” It's not really a fund at all—much less an index fund—although it is hardly the only actively managed fund that claims to be an index fund. The official position of WCI on picking stocks is that it's idiotic.]
Tweet of the Week
A good reminder that it’s always best to treat your colleagues with respect and to defend them from those who are condescending to them.
My trauma patient told his nurse that he wanted to talk to me and not her because “what the hell do you know, you’re just a nurse.” So I took a point off his GCS for confusion.
— Sam Ghali, M.D. (@EM_RESUS) August 30, 2023
Have you ever used financial advice that you found on social media? How did it turn out? Comment below![Editor's Note: For comments, complaints, suggestions, or plaudits, email Josh Katzowitz at [email protected].]