Herman Cain's 2006 Investment Advice

 |  Includes: BZH
by: Tim Iacono

After watching the ascent of GOP hopeful Herman Cain over the last month or two, I couldn't help but think that his name had graced the pages of my blog before, and a simple search turned up this story from 2006, in which it becomes clear that, if Cain is elected to the nation's top political post next year, hopefully he'll do a better job running the country than he did picking stocks, as the housing bubble was about to burst. The 2006 article, in its entirety, follows.

Supply Sider Investment Advice

June 11th, 2006

There's been a little yellow sticky note at the top of my computer monitor since the end of January of this year. It says, "1/21 - Cavuto - Herman Cain - BZH - $75", in reference to a recommendation made by Herman Cain on the Fox business news show Cavuto on Business to buy Beazer Homes (NYSE:BZH) at $75 about five months ago.

It's been sitting there for a while now, and it wasn't really clear what should be done with it aside from maybe adding it to the collection of prognostications that are kept in a text file on my computer desktop. But that text file contains predictions from people whose opinions are respected here, so Herman's little stock tip really didn't fit neatly into that category.

So, when John Rutledge started talking about commodities the other day on Larry Kudlow's show (a program that is viewed here about once every few weeks, and then only to listen to Barry Ritholtz and Herb Greenberg unsuccessfully try to beat some sense into Larry's skull on Thursday afternoons) the idea was hatched to combine these two bits of supply-sider clairvoyance into a short little Sunday post to demonstrate the dangers that lie in wait for anyone taking investment advice from these types.

First, what followed Herman's prediction:

Click to enlarge

OK - it's not clear what could possibly be added in words, the chart says it all. Whoever those poor saps are that bought Beazer Homes back in January on Herman's advice - they deserve what they got.

So, what did John Rutledge have to say?

The exact words are now lost, because the Thursday afternoon Kudlow show has not moved up from "Keep until space needed" to "Keep until I delete" status on my faithful Tivo, but it was something like the following.

After Herb Greenberg gave a thumbs up to buying gold at Thursday prices (adding that he'd buy more if it went lower), and new favorite Jeffrey Saut of Raymond James gave it a big booyah, and then Barry said he'd be a buyer at between $580 and $600, Larry quickly cut off that discussion which was not going in his favor and turned the mike over to John Rutledge so someone, anyone, could say something that didn't trigger Larry's cognitive dissonance synapses which just make him talk louder than he usually does.

Like a true supply-side, Reagan Republican, trickle-down savant, John Rutledge explained that the commodities bubble has burst and the clear confirmation comes from the widespread purchase of commodity ETFs by grandmothers.

Larry liked that answer.

For those who have not already looked up the share price for Beazer Homes, there's good news and bad news. The good news is that it's up over 6 percent today. The bad news is that, had you bought on Herman's recommendation and held it until today, you'd be down about 98 percent, since it's now trading at $1.67 per share.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.