Stewart v. Cramer: Some Thoughts

My apologies for the delete & repost for tumblr followers - something is seriously effed up with Comedy Central’s video today and I can’t seem to make it work. Regardless, the uncut interviews are on Gothamist and seem to work there.

As we suspected, the video making the interweb rounds yesterday was used as Stewart’s main new firepower, and Cramer was in serious mea culpa mode for CNBC.

Stewart’s most salient point is the same that I pointed out yesterday: CNBC attempts to serve two demographic masters - that of the institutional and trading community, and that of the general public. From 5:00am to 5:00pm, the verbiage is geared to people actively involved in the market and that day’s trading, not to mutual fund managers that have buy-and-hold restrictions or 50+ retirees who should be scaling back their risk by shifting to a fixed income strategy. After 5:00pm, Jim Cramer is to financial news as Lou Dobbs is to U.S. News. Their shows whip viewers into a fervor, but if this is the only “news” you watch all day, you certainly have a skewed image of reality. Despite Stewart’s call for more restrained reporting, there’s no way CNBC is going to change their programming currently geared to its core institutional community to serve an audience that isn’t watching.

Unfortunately, the rest of Stewart’s hopes and dreams for Truth with a capital “T” hit a false note for anyone with an inkling of how the markets work. The most valuable currency is information. The first broker-dealer I worked at specialized in “information arbitrage.” If a story we’d been pitching clients made it to CNBC, we’d stand up and cheer, because that was a guaranteed payday. Traders, CEOs, and all the other market players use the network’s wide reach as a tool to gauge what stories are trending - not what facts are important.

“Buy the rumor, sell the news.” When CNBC reports an Apple rumor of a new iPhone to be the reason for increased intraday volume in AAPL, is that the rumor, or is that the news? Sure, the “news” is when Apple confirms or denies the report, but by the time CNBC gets around to announcing the “rumor” to it’s massive audience, anyone who’s going to make real money on that call is already in or out. The greater-fools that follow in on the “tip” they heard on CNBC are what make the subsequent stock movement a self-fulfilling prophecy. Once, a manger told me the easiest way to turn a daily profit was to get up at 5am, check what CNBC’s pitching for the day, and place your orders early. Pretty much everything they show from market open to close is a repeat of what they said from 5am - 9am, just like CNN cycles “Headline News.”

Finally, business reporting is not war reporting. The public has no right to the information. The public has a right to 10Qs and public filings, not to a CEO’s straight answer. The CEOs responsibility is to his shareholders, not Truth. CNBC can ask all the “hard questions” it wants, there is no ride along with the troops to verify or discount what they’re told. The market decides what it expects to shake out later, and prices itself accordingly. The fundamental principle of healthy free market functioning is that everyone tries to get the best information they can, but no one actor can possibly know everything (legally). In fact, this “perceived omniscience factor” played an important part in the current market crash. Everyone was using the same risk pricing model and believed it to be correct. With no one to take the other side of the transaction by thinking the first guys don’t know their assholes from their elbows (to quote my mom), things just went up and up and up in a reciprocal loop.

All in all, I was cheering Jon Stewart on as he stood up for The People. He’s been the only one to do so, and it needed to be done. It felt cathartic. Will things change? Probably not. This crisis happened; it’s so 2008. The market is already looking for the next golden goose, and once it’s well enough established, CNBC will be there pitching their brand of market “intelligence.”