CNBC is Irresponsible

Jeff Feldman wrote this letter to the editor of the New York Times in response to an article in entitled, CNBC Thrives as Hosts Deliver News With Attitude.

The editors chose not to print the letter, so here it is:

Unfortunately, CNBC delivers more than news with attitude. It delivers analysis with bias. And it delivers that analysis incessantly in real time. I have been on Wall Street for 40 years and was there in the late 1970’s when we went through a period as difficult as this one. If you wanted business news back then, you had to work for it. There was almost none on television, nothing more than stock prices on the radio, and most newspapers did not have a business section. The business magazines provided information that was weeks old by the time they hit the newsstands. I was an analyst at the time, which meant I was analyzing what had happened (generally six months earler because of the lag of data) -- not prognosticating what was about to happen. Contrast that with CNBC’s real time analysis and the pundits constantly telling us what will happen next. The problem is that investing is not a collegial activity -- it is a competition! If too many people act on a prediction, the prediction is less likely to come true. If too many people engage in the same strategy or take the same side of a trade (see the last 5 years), it can’t possibly work.

As to Jim Cramer, some of what he does is truly educational. He should stop there and not make stock recommendations. The height of absurdity is his “Lightning Round” in which callers throw out a stock name and he opines on it. He prefaces the round by explaining that he has no advance knowledge of the callers or the stocks they choose. This is represented as preferable to the alternative, where he would know the stocks in advance and have time to research them and provide true insight. He also might know something about the caller so as to determine if the investment is suitable. Can you imagine a doctor giving medical advice the same way? “ I have no advance knowledge of the caller or the ailment. Let’s go to Joan in Indiana. What ails you Joan?” Would anybody accept medical advice in this way? Do we want to go back to the days of medicine shows and Wolcott's Instant Pain Annihilator?

Is money any less valuable or important than health?

The banks and the mortgage brokers have been called out for being irresponsible for putting their interests ahead of and in conflict with the marketplace. The same is true of CNBC.

Safe Passage

by Jeff Feldman.

It was quite remarkable to watch the market trade down on Tuesday, while the Secretary of the Treasury was testifying before Congress. Just ten years ago, that testimony would not have broadcast live and 20 years ago it wouldn’t even have made the news. Now the market is analyzing testimony in real time. This morning I saw a self-promoting ad on CNBC, better known as bubblevision calling its reporting “Fast, accurate, and actionable.” Actionable is what we are all about today. Instant gratification is a requirement.

When Jim Cramer does his “Lightning Round” on Mad Money, he prefaces by vowing that he has no prior knowledge of the callers or the stocks about which they will inquire. He wants us to know that absolutely no preparation or analysis has been done to support his pronouncements. This is, of course, to demonstrate his prodigious knowledge about the stock market. But is this offering really preferable to his getting advance notice to prepare well researched opinions? What about the callers? Wouldn’t they be better off if his responses took into account their portfolios and financial situation? Can you imagine a doctor conducting a “Lightening Round” on live television? “Let’s go to Joan in Indiana. What ails you Joan?” Would anyone act on such advice? Is your money any less important than your health?

It seems we have moved beyond the old joke of “ready fire aim” to simply, “fire at will,” with predictable results. Perhaps recognizing this mentality, Secretary Geithner did not give us actionable information. The absence of same caused the Dow to decline 400 points.

Consider what would have happened if he had given the market what it was looking for? Imagine, if it became apparent from his testimony, that the bank stocks are under valued. How much money would have piled into that trade?

After the testimony, the pundits paraded onto the screen to proclaim they want certainty from the government on the value of bank assets before they will consider investing in them. This is the equivalent of the 19^th century American pioneers proclaiming, “we will not settle the west until the Government takes care of the Indian problem,” or the astronauts demanding a Government guarantee of their safety before taking off for the moon. We must be willing to take some risks without being backstopped by the Government. Note that Intel announced yesterday the intent to spend $7 billion on new plant and equipment. No guarantees. No assurance it will work out. Businesses need to start looking forward without regard for government action. If we start investing in the industries that will solve societies greatest needs: healthcare, clean tech, education, and efficient transportation to name a few, we can begin the road to recovry. Some businesses will succeed, many will fail and we will all be better off. There are no quick fixes to the hole we are in. There is nothing that is fast and actionable. This is a slow difficult grind. Those that say it is too risky or too difficult miss the point. Our country and our way of life are at stake. Those with excess capital can’t hoard their way out of this.

Their capital is worthless without a sustainable economy. And that sustainable economy is achievable. Lets turn off CNBC (making us immediately smarter) and go to work.