Lindsay Lohan is not generally known for her views on economic policy. But something came over her on Monday night. “Have you guys seen food and gas prices lately?” she tweeted. “U.S. $ will soon be worthless if the Fed keeps printing money!” For context, a link directed Lohan’s followers to the site of the National Inflation Association, a group dedicated to “preparing Americans for hyperinflation.”
It is, needless to say, an unconventional position on monetary policy for a Hollywood starlet—or anyone else. Yes, food and gas prices are up, but core inflation has been consistently under the Federal Reserve’s target, despite trillions of dollars of quantitative and qualitative easing and record-low interest rates. But it was a view she was paid to tweet. (A little #ad hash tag tipped readers off, and the organization confirms it paid her.) The National Inflation Association was looking for some good-old, low-brow, high-buzz publicity for its campaign against current monetary policy. And maybe a few people who clicked over from Lohan’s tweet would also look into a few of the penny stocks it was hawking, too.
The National Inflation Association sounds like a think tank. Its website has articles and charts. It seems like it could be an affiliate of Brookings or AEI or the Committee for a Responsible Federal Budget. It is not. “Our goal is to help as many Americans as possible become aware of the disaster we are rapidly approaching. In our opinion, the wealth of most Americans could get wiped out during the next decade,” its mission statement reads. “[B]ut it will be an opportunity for a small percentage of Americans to become wealthy by investing into companies that historically have prospered in an inflationary environment.”
The National Inflation Association is a limited liability company, a private, for-profit business. It is the brainchild of professional stock hawkers, one of whom happens to be the youngest-ever person charged by the Securities and Exchange Commission. It is devoted to educating Americans about our perilous monetary policy. But it is also devoted to recommending investments—including penny stocks—supposedly able to hold value in the supposedly imminent hyperinflationary period.
Its president is Gerard Adams, a young libertarian and the head of Wall Street Grand, “the Number One investor relations and investor awareness consulting company today.” What is “awareness consulting,” you ask? Merely advertising. Publicly traded companies, generally ones with penny stocks, pay Wall Street Grand fees to promote them in videos, on its site, and in newsletters. The company also runs a “penny stock investor membership club” and offers up stocks as “investment opportunities” on its site.
Adams helped start the NIA as a purely educational enterprise, he says, even if it is not a nonprofit. “The website is completely free. It is to educate people, and to talk about things the mainstream media doesn’t want to cover,” he says in a rushed interview between conference calls. Adams pays for it out of his own pocket to the tune of millions, he says, while also asking for donations from newsletter subscribers. (In exchange, they get special reports.) The company employs economists, writers, aggregators, and video producers, he says. He declines to say how many people are on staff.
The purpose of NIA—and the purpose of the Lohan tweet—is merely to raise awareness about the dangers of inflation among young people. “We know that she has an influence,” Adams says. “She’s trying to change her life. She went through her own issues, house arrest. But we thought she had an influence among the youth,” says Adams, who at 26 is only a year older than she is. “We’re trying to go after the youth. And she has stated that she cares about oil and gas prices rising in the past.”
To raise that awareness, the NIA runs a site with commentaries and aggregated news clips. It also blasts them out in free newsletter. But there’s something else in the newsletter too: stock tips—recommendations for large- and small-cap companies to invest in, many related to gold, silver, and other commodities.
If the NIA is supposed to be a purely educational enterprise, why is it hawking stocks? “We get a lot of criticism because of that,” Adams says. “I can understand where that criticism comes from. But 100 percent, we do not get paid by any company that we put into the NIA newsletter. We’re not looking to make any money. We suggest these stocks truly just because we believe that they are good investments in an inflationary environment.” If the NIA were about making money, he says, “I would have advertisements on the website, and would be trying to sell subscriptions, or taking money from companies. But we are truly trying to help get the word out.”
But, as pointed out by MarketWatch senior columnist Chuck Jaffe in June, the NIA has recommended stocks in which its founders have or have had an interest. Wall Street Grand profiled Garibaldi Resources in September, and it showed up in the NIA newsletter in December, along with a disclaimer that Adams has a stake in the company.
The NIA’s other guiding light has a longer, more checkered history as a promoter of penny stocks. Jonathan Lebed, also 26, has the distinction of being the youngest-ever person and first-ever minor charged with running a so-called “pump and dump” scheme by the SEC. Armed with nothing more than a few email addresses, an E-Trade account, and understanding parents, Lebed started buying penny stocks, hyping them on Internet forums, and then selling high. In 2000, when he was 15, he paid a $285,000 fine to the SEC without admitting any wrongdoing.
In a long profile by Michael Lewis in the New York Times Magazine, Lebed evinced little shame. If Wall Street analysts and cable-TV commentators and everyone else were making money talking their books, why shouldn’t he? “Whether it is analysts, brokers, advisors, Internet traders, or the companies, everybody is manipulating the market,” he told Lewis. “If it wasn’t for everybody manipulating the market, there wouldn’t be a stock market at all.”
Lebed did not respond to an emailed interview request, and Adams declined to give further contact information for him. But he remains in the stock game, running Lebed.biz. He does not exactly run from his past on his website, where he notes that “by the age of 16 he made national headlines.” His business “gives a speculative rating on each stock he profiles on a scale from 1-10 with 1 meaning he is very confident in the company and 10 meaning he considers it to be very risky and speculative.”
He and the NIA remain controversial. For one, there is a vigorous YouTube and blog campaign to brand the NIA, and Lebed and Adams, as frauds. The business press has caught on. Jaffe, for instance, blasted the association. It “has spiced up its recommendations of late with penny stocks and issues trading on the Toronto Stock Exchange or on Pink Sheets,” he wrote. “In going that route, NIA turns affinity into a sham, because while it claims to look out for the interests of members (actually anyone who submits their e-mail address) its actions show its real affinity—stock promotion.”
So was Lohan, in promoting the NIA, also advising her fans to invest in penny stocks? Maybe not directly. But the company gives stock recommendations in its newsletters, and her tweet was designed to promote the for-profit business. Her views on monetary policy, then, are just an added bonus.