And this one is for the GSCO fans on this thread.
thedeal.com
Media Maneuvers: Punishing the pundits
by Yvette Kantrow
Posted 07:13 AM EST, Dec-29-2000
Poor Anthony Noto. For a few brief moments last Friday evening, the Goldman Sachs & Co. Internet analyst was offered up by the television gods as a symbol of everything that is wrong with financial journalism today. In a prime time special hosted by ABC News' consumer watchdog John Stossel, Noto was crucified for recommending Priceline and eBay on CNBC months ago without revealing that his firm had underwritten these now downtrodden stocks.
After rolling the damning videotape, Stossel turns to an expert guest to sum up Noto's sins for the viewing public. "In the hype era that we just went through," Stossel's expert explains, "I thought there were an incredible number of people who came on TV [and] hyped stocks that their companies had brought public just to bring in another big piece of change for their brokerage house." Who did this observation come from? James Cramer, hardly the poster boy for conflict-free reporting.
Stossel is quick to point out that Cramer isn't singling out Noto. He doesn't have to, since Stossel has already done that for him. The reporter opened his segment on Wall Street "hype" by introducing David Talevi, a trailer park manager who lost more than $40,000 in the market. What did Talevi do wrong? According to Stossel, he followed the "suggestions he got watching those so-called experts on TV." Cut to Noto's appearance on CNBC.
The segment, part of an hour-long special on "hype," offers a near-perfect summation of the plight of the financial media at the end of 2000. The bull market of the 1990s spawned a bustling business media designed to feed the needs of an empowered, Web-enabled investing public. But in 2000, the bear reared his head, and a generation of personal finance journalists were forced to confront a new reality.
These new scribes, many of whom plied their trade over the Internet, in glossy magazines and on cable TV, anointed their own stars, such as pundits like Noto who freely dispensed investment advice that only a few years ago was reserved for professionals. The journalists became stars, too, as on-air personalities such as CNBC's Maria Bartiromo and David Faber attracted followings far from the floor of the stock exchange. The message of these new celebrities: Buy stocks now.
Alas, for the first time in years, people who followed the stars' advice are losing money. And as they try to figure out what went wrong, they look for someone to blame. Enter Stossel, who last week pointed his finger and his camera at Bartiromo and Noto, and a general concept he called "hype" that "leads lots of people to think they should trade stocks."
To be sure, Stossel is right that the business media, or the personal finance media, traffics in a certain amount of hype. And we all knew that when a downturn began, the mainstream media would waste little time before laying some of the blame at the feet of its specialized, glamorous offspring. "The press often fails to blow the whistle on blatant conflicts of interest, as Wall Street analysts tout the stocks of companies that their own firms are either doing business with or hoping to snag as clients," railed Washington Post media critic Howard Kurtz, explaining the impulse that lead him to write "The Fortune Tellers: Inside Wall Street's Game of Money, Media and Manipulation."
But the situation is a lot more complex than Stossel or Kurtz let on. The hype that they both talk about didn't just lead people to think they should trade stocks, but that they could trade stocks. Take Cramer's creation, TheStreet.com. The site was founded on the premise that the average Joe could trade like a pro, as long as he had access to the same information and tools the pros use. Through their PCs, do-it-youselfers could get reports, chat with "experts" and trade, all while watching CNBC and flipping through Smart Money. The legacy of the business press boom was that for the first time, the chatterings of Wall Street could be heard on Main Street, often in real time.
The playing field was becoming level, or so it seemed. Even Arthur Levitt, chairman of the Securities and Exchange Commission, was saying so, as he made championing the little guy a priority. Initiatives like Regulation Fair Disclosure, the plain English prospectus and the inquiry into Nasdaq spreads helped fuel the perception that given the right tools, anyone could play the market, and win.
But now we know that's not the case. Despite entering all the chat rooms, listening to all the analysts and reading all the simplified prospectuses, people are losing money as the market falls. The media's crime in all this isn't just that it didn't expose the conflicts or that it failed to ask the right questions. It's the premise driving the media that's also to blame; that if you give the masses information, not to mention a 401(k) account, they, too, can invest like the pros, or, even more fantastically, they can beat the market.
The uncomfortable truth is, however, that no matter how savvy financial journalists become and how much access the Internet provides and how clearly conflicts are disclosed, a Goldman analyst is never going to give the same information to Joe Investor as he gives to his firm's big institutional clients that manage money for a living; or at least he's not going to offer it in as timely a fashion. And even if he did, it's a safe bet Joe Investor either wouldn't know what to do with it or wouldn't have the financial resources to act or to absorb temporary losses.
So now we have a financial media that has grown up to serve an information-hungry public and a public that has grown to rely a little too heavily on the information the press provides. It's a cycle that feeds on itself.
Which brings us back to Stossel's knock on Noto. CNBC and Noto are indeed selling something, but ironically, so is Stossel's on-air expert, Cramer. Maybe it's not a stock in which he has an interest, although he has at times been accused of that, too. With Stossel, Cramer is selling himself. Perhaps more than anyone else in the business press, Cramer recognized that to "brand" yourself you've got to appear on every medium. Cramer has done them all: TheStreet.com, Fox News, CNBC, The New York Observer, New York magazine. Last Friday night, he hit it big, airing his views on network television.
Like him or not, Cramer is a representative figure. His message isn't that active investing is a loser's game -- he ran a hedge fund for years and he clearly loves to play -- it's that you need to pick your experts carefully. In other words, lose those Wall Street losers. Pick me. |
