Mar

8

 One of the virtues of my recent vacation was that the market plunge caused me to watch prices every minute of the day while the family was playing. I found the most convenient price feed for me on CNBC which has streaming S&P futures prices and DJ every 30 seconds. The prices are interspersed with an orchestrated mélange of shows, news, and opinions from reporters, hosts, columnists, market mavens, scenes from the floor, self serving comments by investors with positions, mutual fund managers, live coverage of official meetings like the Fed before congress, and guest appearances by politicians.

As I have always eschewed reading any newspapers or watching TV, (Indeed four generations of my family have not owned a TV, and our kids frequently are asked at show and tell to describe what it's like not to have a TV in the house), I thought it might be appropriate for me to give some impressions of the coverage the same way that it might be valuable for a man from Mars to comment on the backdrop of human comings and goings.

My choice of CNBC was apparently fortuitous as this station is recognized as the leader in global business news. Time Warner Media states they reach 88 million households, a survey of financial workers shows that about 90% of them watch it at least once during the day. The profits of the station are about 250 million, and viewership of approximately 500,000 is apparently double from 2 years ago.

Influential people seem to recognize this and during the week that I watched, such luminaries as Hillary Clinton came on for a special message that foreign holdings of US debt should provide a wake up call for US vulnerability. Abbey Cohen gave a very thoughtful bullish prediction for US stocks the day after the crash and Warren Buffett himself was shown repeatedly talking down the US stock market because of its vulnerability to a hard landing, due to the twin deficits. All that was missing as far as I was concerned was an interview with the Palindrome himself stating that he was bearish on the dollar or stocks.

I have a theory that the public is always guided to do the wrong thing so that they will make a contribution to the market infrastructure and provide funds for the massive communication costs, buildings, salaries, brokerage house traders, dealers, hedge funds, and mutual funds that must survive in order for the whole ball of wax to continue. Thus, during the period I watched from Wednesday, February 28 to Saturday, March 3, which was sparked by the 4% decline on Tuesday, Feb 27 and a 5% decline in the market in a five-day week, I was particularly anxious to see how the public would be guided to take a bearish view.

As is well known, after big declines like this, the most successful investors take out their canes and hobble down to the street and buy. This is greeted on average with a 2.5% rise over the next 10 days, and smaller rises each of the next five days, as has been well documented in this space, my books, and the many that have noted the effect by counting independently or who have the ability to count it themselves, or talk to someone who has. I was not disappointed in my belief that much bearish guidance would be given. Indeed, two of my favorite techniques of propaganda pseudo talk were used prominently — namely the mystical perfect lie technique of causing magic to happen and then belittling ones abilities ('that key you lost 10 years ago that I just pulled out of the clouds doesn't count as evidence of my mystical abilities because I wasn't really trying to do it'), and the technique of the quote taken out of context.

The quote out of context was particularly salient on Wednesday as a chronic bear was interviewed about Ben Bernanke's testimony. Bernanke's testimony was the most bullish that I have ever heard from a Fed official. He stated that there was no liquidity crisis, that the economy was destined to improve over the next six months, and that there was no change in the economic data that would warrant a prediction a la Greenspan's 1/3 probability of recession. Yet the chronic bear was able to find one sentence in dozens of pages of testimony that he said showed how bearish the Fed was, in that it said that if the rate of real estate increase did not continue as it has in the past five years, that it was possible the amount of spending might not be buffered as much as it has in the past by this increase in wealth.

Similarly another chronic bear, who was greeted with an "every bear has his day" headline, emphasized that he wasn't really worried about China, which was the proximate cause of the decline on Tuesday morning but all the sub prime lenders were about to evaporate. A very nice climactic punch was thrown by a wild man coming on the stage at about one each day. Jim Cramer screamed that this was an amateur bear raid, that he couldn't really say how bad the subprime was because it would be indiscreet, and that he would have liked to see the Dow fall below 12,000 to really create fear.

The back and forth between the attractive female reporters who tried to hold him down as he screamed about how stupid everyone else was, and how he didn't care about the yen carry trade at all, made for a thrilling and highly romantic tête-à-tête. The excitement was enhanced by a distress call by the attractive other that, to make matters worse, the chronic bull Larry Kudlow was going to be on next, against the chronic bear forensic accountant.

I found watching the orchestrated performance of reaction to the market panic during the time that I listened that I could attribute the movements in the market itself to the content of the messages communicated.


When news of Hillary or Buffett was reported, or Herb Greenberg or other chronic bears spoke their piece, or Maria Bartiromo decried the latest earnings report, the market went down say 10 to 20 Dow points in the next fifteen minutes. When the venerable senior economic analyst, Joe Kernan or a Florida buy and holder, or Abbey Cohen talked, to say that it had all happened before, and in the fullness of time, that the decline wouldn't even be noticed, the market went up some 10 Dow points in the next 15 minutes. It would seem to be possible to profit from such moves by buying and selling during times when the market is on edge based on who is scheduled to talk.

I found the on the scene reports of Michael Santolli, from the floor of the Chicago Merc, very interesting. He managed to provide a good description of what people were saying about what caused the latest move in the market over the previous half hour. He was very good at maintaining a judicious manner in not forecasting anything. Indeed, during the time I watched, there was little attempt by anyone to try to provide a rudder, such as what generally happens after panics.

The consensus seemed to be that the decline had not yet reached 10% and it was likely that it had further to go on the downside before turning up later. Such communiqués go against the theory of rational expectations, which are true to the extent that if we think something is going to go up 10% by the end of the year, we're going to buy now, even if we think there's a chance that there might be some unpredictable bumps along the way. I found Maria Bartiromo a very knowledgeable and serious reporter. Her frowns, pouts, and cover the eyes bangs, seemed to inject a gentle scorn for the men she interviewed, as if she would like to give them a proper beating if only they weren't so foolish.

I understand that during the tech heydays of the 90s she had a much more engaging and cheerleading demeanor and she is to be complimented on this about face. This is also helpful to the market ecology as exactly the opposite would in my mind be more profitable to the viewers. Regardless, for me this added a very fine, exciting ambience when she came on at the beginning and end of each day with her somewhat denigrating, above the fray chastisements of those who would be long during this time of panic.

One of the ironies of my Florida viewing was that just when the market was at its most climactic bearishness, the shows would end, and a local commercial would be shown. The commercials all seemed to highlight the availability for one week only of personal loans without bank statement with an interest rate of 6%.

I found the rate more and more attractive as the market decline continued. The same for the Florida vacation homes available with 10 acres of land for just a $100 deposit. Also ironic was seeing the constant advertisements from someone whose research I find totally wanting, Jeremy Siegel and Michael Steinhardt. Together they plugged an ETF fund that somehow had the right mojo with respect to price earnings ratios. One would have hoped that these dim luminaries would have more dignity than to hawk such an untested concept.


Aside from the knowledge I gained of the rhythm of the markets, with the Worldwide Exchange moving to the squawk box to Morning Call, to Power lunch, to Street Signs, to Closing Bell, Kudlow and Company, then "one man, one visions, one hour." Jim Cramer with the moves in the market during each episode. These were somewhat predictably based on who was scheduled. I found that the main value I gained was realizing that the Dow Index is reported about once every five seconds, and thus, is a much better index to monitor for what just happened, and changes in microscopic inertia than the S&P Index, which is reported every 15 seconds.

Steve Leslie writes:

 I watch CNBC mostly for the entertainment value. I find much of the information they provide glorified fill between commercials although I have to admit that Liz Claman is one heck of a fill between commercials.

That said I do find value in certain aspects of the show. Most notably the premarket opening with Bob Pisani and the effervescent Rick Santelli and guests who are interviewed who actually work on the floor. Without going into detail, I have my favorites for a variety of reasons. I watch some of the aftermarket shows, Kudlow and Company, and Fast Money at 8pm. I like the format and am growing weary of O'Reilly. Yes it can happen.

CNBC dominates this space because there is really no alternative for financial news on cable TV other than Bloomberg TV, which is hard to find in some markets. I get Bloomberg on my cable provider only from 7-9AM and it is buried on the E-Channel.

For those who have a dish Bloomberg has a station available 24 hours a day, one that is much less commercialized than CNBC. My night owl friends tell me that CNBC Europe is a very good show.

Thus what is one to do for financial information when away from the office or grows tired of CNBC?

Bloomberg has a website where you can get Bloomberg TV and Bloomberg radio live on streaming media.

I find a wireless to be a marvelous alt for my home computer. I can go to any bookstore, coffee shop, library or public building or restaurant and pick up a wireless connection. Free

I trade from my PC laptop through Scottrade elite while having coffee in the morning or during meetings at lunch. I do not trade futures but Victor tells me that Laurel likes Interactive Brokers.

Sprint offers a mobile wireless now for around $40
per month down from $59.00. I can have unlimited access to the Internet through
my PC literally anywhere I go in the world.

There is also a service called go to my PC that allows a direct connection to your PC through the internet from a remote location. Thus you can connect from your laptop to your desktop or office computer.

XM Satellite and Sirius radio have simulcast of CNBC and Bloomberg for $12.95 per month. Great for commuting. Plus you get Howard Stern not Howard K. Stern (tongue in cheek)

If carrying a PC is too cumbersome or bulky, a blackberry is the weapon of choice here. One can text message and receive financial information on demand.

On the low end, cell phones now come equipped for stock quotes and other financial information on demand. Now while in transit either by plane, train, automobile, or on vacation, you can get out of the room and go fishing or sit by the pool or go to the theatres or the movies or the craps table, or watch the zanies and crazies on Duval Street in Key West and be in continuous contact with the financial markets anytime and anywhere. It is just a matter of understanding the technology. 

Henry Gifford writes:

I don't claim to know why the information on CNBC is so bad, but perhaps things are much less planned than the big players encouraging the stream of bad information.

In the field of boiler repair, there is a popular guru who knows little, and provides much misguidance. Equipment manufacturers sometimes provide good information (some people say I made a million dollars with my apparently proprietary system of reading instructions and following them), but it is rarely followed. Thus there is no pressure to improve the quality of information, which is often poor.

One conclusion that fits is to say that the industry is happy to sell boilers to replace the ones destroyed by bad practice, and the service companies are happy to do more frequent repairs. I cannot think of any counting or examining of business relationships that would prove this wrong.

But I think there is another, more correct explanation. The guru told me he cares more about magazine article deadlines than getting the articles right. The articles help sell his books and seminars, so he has an incentive to keep the articles flowing. Service companies don't see the payback in training workers who can then just quit, and don't see any reason to sell skills better than the other companies provide, as consumers can't very well have a "control" to see what would have resulted if they chose another company. In sum, the standards are low, science and counting hardly exist, and most people in the industry don't care enough to learn what they need to know.

Seen another way, picture the Chair trying to get a spot on CNBC, and using Daily Spec sales statistics as a credential. Nobody read it because it didn't tell people what they wanted to hear.


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