Sometimes TV really is worth watching. Case in point: Jon Stewart and the Daily Show. Regardless of what you think of The Daily Show, this week has been spectacular and may just crescendo tonight. Why? What's going on that it bears mention on a financial blog? Well, Stewart began this week by taking a comedic swipe at Jim Cramer and CNBC, which summarily got right out of hand.
You know CNBC, the all business, all the time, cable news channel. Jim Cramer is the host of the CNBC show Mad Money, known far and wide for his rambuncious behavior. Cramer often screams at the camera, admonishing the likes of Bernanke, Geithner, and Wall Street amongst others. He is usually either spectacularly right or spectacularly wrong, giving rise to great fame and a wide audience.
It all began with a Stewart bit chastising CNBC's Rick Santelli who gained some notoriety for a recent outburst (for the life of me, I can't figure out how to embed a TDS vid, so please come back after watching each link. Hey, Daily Show, if one of you read this- make embedding a little easier, enough with the proprietary feed crap! You want the exposure, right?):
March 4, 2009: CNBC Gives Financial Advice
This bit was followed by a low roar in the blogosphere and also from CNBC. So, Stewart followed up with this:
March 9, 2009: In Cramer We Trust
This is when the NBC franchise went ballastic and toted Cramer around on a variety of networks to bash Stewart. Stewart doesn't shy from a fight though, and shot back with this:
March 10, 2009: Basic Cable Personality Clash
Now that you are all caught up, tonight Cramer appears on The Daily Show.
Which brings me to a little diatribe on Cramer. "What do you think of Jim Cramer?" is one of the most common questions I encounter. And the answer doesn't lend itself to the 30 second attention span of the asker. Here is where I stand on Cramer:
I like him, sort of. Cramer is very smart and I find his observations very insightful. In fact, a professional watching Mad Money can gain or generate many valuable ideas. But that doesn't mean Mad Money is doing the general public or average CNBC viewer any good. Frankly, I think it is largely a disservice to them. Therein lies the problem- communicating Wall Street speak to the general investor without the experience or training.
For example, Cramer likes to trade which is different than investing. Investing is not about buying something and selling it 20 points higher, but rather about buying an ownership interest in a real business for a long period of time because that business is attractive and the price of getting into the business is attractive. To Cramer, investing is about trading stocks, not buying businesses. Yet this doesn't come through on the show because Cramer understands the fundamentals of business. He understands what makes stocks vacillate and why industries ebb and flow- all of which is confused with "investing". For the layman watching, they learn that investing is about trading based on news and momentum instead of identifying great opportunities to be a business owner.
Cramer is very bright. There is no shortgage of intellectual horsepower there. However, it takes all of a few seconds to see how emotional he is. As you know, emotions are the enemy of rational, logical thought. (See Behavioral Finance). Like every investor, you can't always be right. Cramer makes mistakes- sometimes huge, glaring mistakes, just like we all do. It is disingenuous to hold that against him. While I think Stewart knows that, CNBC deserves a lashing just as Fox News does (and shame on NBC for using its multiple networks to push a point- very Fox-like and definitely against the spirit of ownership caps in the media sector, but I digress). Any time a network fills the air 24x7 with a topic, it will stretch it to extremes. CNBC, like Cramer, can be valuable to someone who intimately understands what they offer, yet it can be detrimental to the average joe. Every day, CNBC has on dozens of pundits or fund managers providing their opinions. That sample of prognosticators is simply a sample of the market as a whole and representative of the market's sentiment. Just like the average fund or investor will not beat the market in the long run, the average prognosticator is going to be wrong- or sometimes luckily right- or sometimes right for the wrong reasons. If you can't separate the wheat from the chaff, you are wasting your time watching.
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People who trade, or even invest, on other people's opinions are doing themselves a huge disservice. If you switch on CNBC, watch a couple of Mad Money episodes and think you're qualified to invest your savings, it's your fault when you fail. But Jon chooses to blame CNBC for what people do with their money? It's the same kind of thinking that causes people to blame games for violence, or motoring shows like Top Gear for racing stunts.
ReplyDeleteCramer makes his show interesting by being emotional. And you're right, emotions are the enemy of rational, logical thought. But you honestly believe no preparation/research goes into each show? You think he's winging it every night?
I love how Jon sits back and blames CNBC for not forecasting the crisis or for not knowing Stanford was a thief. But, outside of Roubini, who did predict the crisis? Who, before he was exposed, thought Stanford was a cheat? Did he blame CNN and Fox for not forecasting 9/11? Perhaps he should get Nassim Taleb on to explain to him what a black swan event is.
Jon's riding a populist sentiment against Big Finance, but it's plain he doesn't really understand what the problems are. What's worse is that no one is willing to call him out on it.
re glaring errors. In a message board debate in August 2008, I claimed no one would be talking about sub prime by January 2009. Oh dear. Was I wrong. I went back, found my old post, and noted I was amazingly wrong. I could have technically wiggled out of it. You know, we're no longer talking about sub prime. We're talking about things a lot worse.
ReplyDeleteBut of course that wasn't the spirit of what I was saying.
For anyone who missed it, here is the link to the full show which is almost entirely about the financial mess and a very long interview with Cramer.
ReplyDeleteMarch 12, The Daily Show with Jim Cramer
Brett,
ReplyDeleteYeah, stunt shows usually carry a disclaimer. Perhaps CNBC should too. But if a bunch of geeks in suits went on TV and said the Sun now revolves around the Earth, would we just believe it to be true? Lack of knowledge is lack of knowledge.
I understand what you're saying with the snake-oil. Except it's easy to test if something like that works. It's harder for stocks. Let's say the fundamentals are good or an analysis tells me that the stock is a buy. If I suggest that and it falls, is that necessarily my fault? What if other people are deeply discounting the stock?
That was Cramer's point. Forecasting isn't easy, so I wouldn't call it snake-oil. In any case, that wasn't Jon's point.
As I said on another forum, sure, a lot of people were predicting the bubble would burst. What matters are details. Krugman, for example, has been predicting recessions since 2002, at least. When he got it right in 2007/2008, he got the details wrong. Is that useful? Not at all.
What makes it a black swan is that the details are hard to predict. It's what made 9/11 a black swan. Anyone could have predicted the US would be a victim of a terrorist attack; what matters are when and how. You're right about Shilling. I'm sure there were others. I meant to illustrate that they were a minority.
As you pointed out, "when only 10% (eg) are calling for doom and none comes immediately, they look like kooks and the permabulls look sane when the opposite is true." The question is: should CNBC be touting the counter? Do other national networks tout the counter to accepted facts of 9/11 or other things? Should they be putting up Truthers if there's a 1% chance they're right? 5%?
I remember a lot of people blaming American media for touting the Iraq war. Plenty of people in the rest of the world didn't buy it, but a majority of Americans did. Were Americans denied information that the rest of the world had? No. Why the difference, then? American media even put up lots of war skeptics. It didn't matter. The sentiment was one way and no one cared about niggling details like the post-war ideas. It's the same in a bull market: no one cares why something may not work in the unspecified future if certain things happen to fall into place.
With regards to Madoff, a lot of people stayed clear. But one guy actually did the work to prove it. And the SEC with its army of experts didn't buy it even after the work was done for them. What makes anyone think CNBC, even with its experts, would be successful at unraveling shady models when an institution dedicated to that isn't?
I understand if he was saying CNBC doesn't grill their guests. I can see why they don't. If Jon's point really was that CNBC isn't very critical, I offer him my congratulations on realizing something that is rather obvious after watching for a couple of hours.
But I don't think that was it. Watch the rest of his shows during the crisis. He is angry at financials and anything associated. He gets angry whenever someone suggests anyone else except Wall Street shares the blame. He gets particularly incensed when someone even dares to suggest that a lot of "homeowners" were unscrupulous.
I've read the book, but I'll happily admit I don't get Taleb's distinction between a White Swan and a Black Swan when he counts 9/11 as Black. There really was no surprise that the terrorists would attack again. They did it in 93 and on the USS Cole as well as other places. Perhaps, it'll a good post for another day.
ReplyDeleteI've been a long-time watcher of the Daily Show. I've seen every episode since 2002 (or thereabouts). I base my opinions on that. I've seen when he gets angry about something. As an aside, both Megan McArdle and Wil Wilkinson have alternative takes on the story. If there's one thing about Jon, he knows how to make the news.
All that said, Colbert's still the best.
Truthiness, my friend, truthiness.
ReplyDeleteSince we were talking about the .com bust, let's not forget how the new economy hype was being abetted by CNBC. Maybe in addition to their stock ticker they ought to run a safe harbor disclaimer too...
ReplyDeleteI have to point out that CNBC Asia (which I turn to) is far less manic than CNBC in the US.
ReplyDeleteIf I meet Grace Phan, a former anchor, again, I'll ask her what she thinks about all this.
Stewart's point is that CNBC is *supposed* to be reporting business news but is instead just offering entertainment and repeating industry talking points without any in depth investigation. CNBC and Cramer (as evidenced by the clips shown) lack all journalistic integrity. Y'know what? Jon Stewart is right again.
ReplyDelete