The Tycoon Report

Don't Fall for a Pretty Face on This Ugly Market

Friday, May 22, 2009 | Ethan Roberts

With the long holiday weekend coming up, you may be looking forward to taking your mind off the markets for a few days. As for me, I've been researching the financial news networks -- not for trading and investment ideas, but instead to examine the differences between the quality investment information you receive in The Tycoon Report versus what the general public is gleaning from their televisions.

In particular, CNBC has been on my radar a lot lately.  But doing the research meant spending a large number of hours having to actually watch it.  Hey, that was pretty arduous at times, for reasons I will get to shortly. 

Here are a few facts about CNBC.  Did you know that originally it was called the Consumer News and Business Channel?   According to Wikipedia, CNBC is the 19th most valuable cable channel in the United States, and one that is worth $4 billion.  CNBC is THE business channel that everyone watches to find out whether their stocks are going up or down. 

I've been watching CNBC off and on since the early 1990s, and I've seen it change quite a bit.  I've seen the good, bad and the ugly.  Well, maybe the not-so-ugly lately.

CNBC: The Good, Bad and the Not So Ugly

One major difference between the CNBC of 2009 versus the 1990s, is that female anchors and guests now comprise a large part of the programming.  In the earlier days, it was all Joe, and David, and Mark and Bill.  Today, women not only report from the floor of the New York Stock Exchange and other markets, but they anchor or co-anchor many of the programs as well. 

After the 2007 launch of the Fox Business Network, things really began to change.  Fox believed that it could attract a youthful audience by hiring and emphasizing attractive, young female anchors.  Well, CNBC realized that it had better compete by doing the same, or else the channel could easily lose market share.  So, suddenly, a slew of new female anchors and reporters -- each one seemingly more glamorous than the next -- began showing up on the screen. 

Watching CNBC these days is sometimes like watching a beauty pageant, except that the women of CNBC are also incredibly bright, well-informed and financially savvy!  There's Erin Burnett, Becky Quick and Trish Regan (a former Miss New Hampshire, who graduated cum laude from Columbia University).  I'll tell you, it makes my head spin, just to watch them talking about TARP funds, mark-to-market rules and the Gross Domestic Product!


Then there's Maria Bartiromo, a veteran diva of CNBC since the 1990s.  She's astute, hard-working and creative, but oh that voice!  It's loud and shrill, with a fast, staccato style of speech.  After just one hour of listening to her, I couldn't take it anymore.  Like chalk screeching on the blackboard, it's certainly not for the faint of heart.

But my No. 1 criticism of CNBC recently is its incessant emphasis on airing heated debates, in which an enmeshment of monetary policy and political issues becomes overwhelming to the point where the guests are just yelling over each other and no single individual can be heard.  It's as though CNBC has now morphed into a financial version of "The View," that dreadful afternoon bastion of banality in which one has to endure the catfight du jour.  

In the CNBC version, Larry Kudlow, a stalwart fiscal conservative, is frequently paired against Steve Liesman, a more liberal economist, in a shouting match of polemics that only serves to obfuscate important hot-button issues such as whether or not the Obama administration is destroying capitalism, or simply changing it for the better. 

CNBC then throws gasoline on the fire, by adding several other people into the mix, and shrinks them down into those silly little "Brady Bunch" split-screen boxes.  Yes, it's classic television all right, but without the laugh track!


                        

On the other hand, when it comes to a dog fight, I love Rick Santelli.  He's the gutsy little guy who provides the Treasury market reports each morning.  He had his 15 minutes of fame a few months ago by going ballistic on live television about the Obama administration's plan to spend $200 billion on a housing rescue plan, and Santelli's rant inspired thousands of people nationwide to hold a 2009 version of the Boston Tea Party. 

Suddenly, people started talking about Santelli running for political office and all kinds of other wild things.  CNBC milked the publicity of his meltdown for all it was worth, until (as reported by the New York Post) Jeffrey Immelt, the CEO of General Electric, and Jeff Zucker, the president of NBC Universal, allegedly told CNBC to tone down its conservative rhetoric and anti-Obama rants. Then, suddenly, Rick Santelli was persona non grata.


Another favorite reporter of mine is Diana Olick.  Diana is the CNBC real estate analyst, who also writes for CNBC.com, and she provides regular updates on the new home sales, builder permits, pending sales, etc.  But unlike so many in real estate journalism, she is a straight shooter -- one who gives an analysis of the market that pulls no punches, and is without sugar-coating. 

In fact, she's my second-favorite real estate writer on the Internet.  Can you guess who is my favorite?


Time to Tune Out the TV Talking Heads

I can also say, in all honesty, that the depth of market analysis that is found here at The Tycoon Report, is rarely ever heard on CNBC.  I can't remember the last time I heard someone on CNBC talking about the Bullish Percent Index or Point-and-Figure charts, as Teeka Tiwari and Chris Rowe often do here.  That kind of in-depth analysis would be most welcome on TV.  Maybe CNBC needs to invite our guys onto the show every so often!

After watching CNBC for a long time, I have concluded that the best way to make money from that channel is to take it as a contrarian indicator when the emotions get out-of-hand.   As soon as Mark Haines starts boasting about how great the market is doing, that's probably the time to sell.  Conversely, when all the anchors are talking gloom-and-doom about free-falling markets, perhaps that's when you should consider buying. 

After all, these people are human, and their emotions reflect the sentiment of the markets as a whole.  However, sometimes CNBC takes on a disingenuous feel when the so-called "news persons" become cheerleaders for the markets to rise.  To be fair, I guess it's difficult for them to remain objective when their own 401(k)s are dropping through the floor!

Where Would the Markets Really Be Trading, Without Financial TV's Influence?

No other financial news channel holds the power to move markets as much as CNBC.  When Joe Guru, the blah blah analyst at XYZ Brokerage, gives viewers his top stock picks, you can bet that the scrolling ticker at the bottom of the screen will soon indicate thousands of shares of those stocks being bought. 

And although his credibility is often attacked, there is no one with the ability to quickly move a stock higher or lower than Jim Cramer.  I visualize thousands of traders watching "Mad Money," their laptops already poised to buy or short massive shares of stocks.  The moment that Cramer utters a stock symbol with glee or disdain, they simply type in the symbol, and then hit the "submit order" button. 

Occasionally, a well-respected guest can move the markets as well.  Just last week, Meredith Whitney, a noted bank analyst, appeared on CNBC, saying that bank stocks are now overvalued and she would not own any.  Within minutes, the bank stocks, along with the general indexes, began to sell off. 

Another thing you can count on -- about 80% of the time, there will be a sell-off whenever Alan Greenspan, Timothy Geithner or President Obama give a speech.  This sort of predictability used to drive my father crazy.  Greenspan would come on and start talking about the economy, and Dad would yell, "Shut up already!  You're driving down the market!" 

So love it or hate it, CNBC is here to stay.  Use it wisely, and you can use it to make some money.

Now that I've had my say, what do you think of CNBC?  Who do you like the best? The least?  I would love to hear from you.  Until then. ...


See you next week!






Ethan Roberts
Contributing Editor
The Tycoon Report