Since our demographic is arguably the most in need of advice when it comes to investing in the stock market or basic asset allocation, simply because we’ve got less experience than the over 30 crowd, it’s supremely important that we be able to tell the difference between good advice, bad advice, and BS.

It’s hard to tell the difference between good advice and bad advice except in retrospect, but the older cohort entirely forgets about the third and most damaging category, BS, maybe because they’ve been out of college for so long. Anybody who’s ever written a term paper without really doing the reading for the class or attending the lectures knows all about BS, it’s about making an argument when you don’t really have a clue about the underlying facts.

Bad advice, in my view, is based on knowledge of the facts and rigorous analysis but nevertheless turns out to be wrong. It deserves to be called advice because it’s made with a good-faith effort. Good advice is also based on knowledge of the facts and rigorous analysis, but it’s of a higher quality than bad advice.

BS has nothing in common with good advice or bad advice. It’s when someone spouts an opinion about a subject without doing anything close to the requisite homework and tries to pass him or herself off as an expert.

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I bring all this up because a friend sent me a column written by actor and Nixon administration apparatchik Ben Stein about a week and a half ago. The column, called “Why I’m Still Buying,”  contained the closest thing to an admission that the author doesn’t offer advice, but rather BS, that I’ve ever seen.

Here it is:

“So, I assumed, and wrote, things would be fine. Where I missed the boat was not realizing how large were the CDS based on the junk mortgage bonds. They were not only large, but absolutely staggeringly large. Where the junk mortgage bonds were in the hundreds of billions, the CDS were in the tens of TRILLIONS. If the sellers of the CDS had to pay off in large part, the liability greatly exceeded the total bank capital in the United States and maybe in the world. That is, the derivatives based upon the junk mortgage bonds could be - and were - not in any way limited to the size of the mortgage bonds themselves, and this I did not know until a few months ago.”

The bold and italics are mine. Let me be very blunt: if you don’t know the size of the market for credit default swaps, if you don’t know that they are pretty much unregulated and are, roughly speaking, insurance policies that can be bought on debt by anyone, in any amount, then you have no business telling people what they should or should not do with the market.

Credit default swaps have played a very important role in the financial crisis. You can use your friend Mr. Google to look up what they do, or the size of the market for them. But if you don’t make the effort to find out, you’re not dispensing advice. You’re dispensing BS.

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The next time you see someone admit to not knowing some incredibly crucial piece of information who continues to express opinions on the subject anyway, you’ll know not to listen.

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