Michael,
Great points. However, when people criticize CNBC re: their airing of analysts' touts, I don't think they are blaming CNBC for their shrinking portfolio. At least most of the time...I'm sure occasionally there are one or two crackpots dumb enough to put their kids' college funds into, say, AMZN at $80 because they saw the hypesters pumping it on TV and they now blame CNBC when they only need to look in the mirror to actually find the person responsible for their kids going to community college instead of Stanford :).
I think the reason many are criticizing CNBC, CNNfn, Motley Fool, et.al now is because they gave these same clowns a forum to pimp their wares in 1999 and 2000, didn't question these analysts' logic back then, and are generally loathe to hold them accountable today.
What I mean by that is: throughout 1999 and most of 2000, we saw a steady stream of high tech CEOs, as well as analysts employed by the wirehouses, use the airwaves to hype stocks that were already at levels that were certainly unsustainable. To justify their lofty predictions, they used newly-formed "metrics" you'd never see in any of Graham & Dodd's writings...high tech "fuzzy math," if you will. Rarely were they ever challenged on-air, and when they were, the response was always, "it's different this time..." In fact, that was the ad catch-phrase for a certain investment bank who specializes in high tech underwritings.
Anyone who's studied the financial markets knows that sector manias come and go, but they all eventually die out and they all end with Joe Sixpack holding the bag. That's how the mania game works on Wall Street. I worked as a gaming analyst in the early-mid 90's during the gaming stock boom, when many houses trotted out the same sort of fuzzy math that, to justify some of the prices and multiples, you'd have to have legalized casino gaming on every street corner in America. It ended up in the same fashion we are seeing today with these tech stocks...a ton of easy money was made by the guys who were in early, but in the end the people who were left holding Casino Magic at post-split $27 (ended up getting taken over at $2) and President Casinos at reverse-split adjusted $150 (currently at $ 0.42) were the individual investors. Manias are always a zero-sum game: the hypesters, firms and fund managers always win, the little guy always loses.
To be sure, media giants such as CNBC aren't responsible for bag-holders' losses...caveat emptor, right?!! No one at CNBC or CNNfn held a gun to Joe Sixpack's head and made them buy CSCO at $70 or AMZN at $80. I do not feel sorry for anyone who lost money on a stock because they saw it touted on a TV show.
But this much is true...when CNBC (and other media, to be fair) gave people like Meeker and Blodgett carte blanche to hawk their wares using their hyperbole and fuzzy math, it did indeed represent irresponsible journalism. They made superstars out of these clowns...when instead, they should've been asking them the tough questions (i.e. "Henry, how can you justify pumping these companies when they will not be profitable in the foreseeable future, and quite possibly never will be profitable" or "Eric G., you're reco-ing CSCO at $64, yet how can you honestly justify paying 100x earnings for a company who's growing at 30-40%?") BACK THEN, not now, after the fact.
Take it a step further: why did they ever get any airtime anyway? These analysts were obviously salesmen who had a big incentive to move their overpriced inventory and any responsible journalist knew that and should've set the story up that way. If a reporter for Car & Driver magazine walked into a Ford dealership and the salesman told him a Ford Escort was worth $500,000, would the reporter quote that salesman in future articles as, "Automobile Guru"? Of course not...if he quoted him at all, it would be facetiously as, "Sheister Joe--he of the $500K Escorts--gives us his list other must-own vehicles."
To some, this may sound like Monday Morning QB-ing, but it's not. Anyone who's been through or studied more than one bull and bear cycle should know it's NEVER 'different this time.' CNBC should've been asking the same tough questions you and I would think of/ask when we do our due diligence on a stock. Instead, the producers ran it like it was a prime-time entertainment show...making celebrities out of people like Meeker, Blodgett, Abby Joseph Cohen and Joe Battipaglia and boosting their ratings using carnival barkers such as Maria. And a lot of naive, non-market savvy newbie investors got sucked in as a result--people who, 3 years ago were watching Oprah and Jerry Springer instead of Squawk Box.
Sure, financial TV is the same as the circus business or any other entertainment venue--attract a wider audience, more patrons. The difference between Barnum & Bailey and financial TV, though, is that Barnum & Bailey doesn't encourage it's paying customers to try out the high-wire act themselves, and they'd never let their cheap-seats patrons be used as a feast for the circus' lions and tigers (Goldman Sachs, Merrill, etc. in this case). TV is a for-profit venture and expanding viewership is required by GE shareholders...but if nothing else, CNBC owed it to their newer audience members to offer the disclaimer of "don't try this at home."
No one should begrudge Meeker, Blodgett, Noto, Goldman Sachs, etc. for what they did--we're all out to make money, right? But as journalists, CNBC should've deemed these guys as salesmen (which they are)--not as celebrity gurus who've discovered a better mouse trap. And since they did hold these clowns out to be "financial genius celebrities," they at least owe it to us to paint these guys as dopes, since their fuzzy math has indeed come home to roost. It's high time more financial media guys took a page out of Ted David's book and remind us which of the 'emperors' have no clothes.
Gary |
