Money Honey and the Sticky Mess of Business News

JP Morgan Stock CertificateWell, no surprise here… Maria Bartiromo is leaving CNBC for the friendlier climes of Fox Business News.  [Guardian]  FBN appears to be collecting a group of well known anchors who represent a form of business journalism which is fine for the Financialists among us but not quite so good for the illusive common consumer of business news.  Not to put too fine a point to it, BUT the sooner this assemblage is all in one place — away from those of us who are not willing to settle for blather and bluster the better.  Here’s why:

Investors vs. Traders — Michael Hiltzic, writing for the LA Times, notes the “top” business news cable channel isn’t about business. He’s right:

“First and most important, CNBC isn’t really a business news service for the average investor, though that’s how it pitches itself. It is and always has been a service for traders, who are nothing like investors. Traders have very short investing horizons, have to move fast, and often don’t make their decisions on corporate fundamentals like balance sheets, cash flow and the potential for profit or loss.”  [LATimes]

If you are looking for information about the health, wealth, and management of a publicly traded corporation — it isn’t on the so-called business channels.   An investor is looking for information useful toward making a decision for longer term allocation of capital, the focus on the Quarterly Earnings Report is of interest to the traders who may not hold a stock much longer than it takes to make a profit on its sale.   This situation leads to the second problem.

Blind Shots in the Dark — traders trade, that’s what traders do.  They are guessing, conjecturing, speculating on the future price of a stock, constantly running toward or away from moving goal posts.  Thus, what we get on the business channels all too often includes less than illuminating formation.

Convenient causality – Convenient causality is clearly visible when the talking head on the TV says something like, “Shares of toy maker  Silli-Mess rose today after reports indicated strong consumer sentiment for this holiday season.”  Whoa.   While toy sales may, in fact, have a good run because the consumer sentiment seems to be higher, unless the toy is a blockbuster with the little tykes it may just be one more plastic piece of short term entertainment in a highly competitive market.  And, just because “consumer sentiment” is slightly higher — who says that’s going to drive sales of a particular product?  A person could make the same statement about cars and canned soup.

Dangling Correlations – the second cousin of the convenient causality.  Consider the following two headlines from the same news outlet in the space of 15 hours.  Monday, November 25 headline: “Oil prices stabilize after Iran deal, Asian shares steady” [Reuters]  Tuesday, November 26 headline: “Global shares droop as oil prices climb on Iran deal doubts.” [Reuters]  So, is there a correlation between the current diplomatic efforts with Iran and oil prices?

There might be, BUT does this tell us much of anything about larger, long term, factors like exploration results? Consumer demand?  Trends in fossil fuel utilization?  Nupe.  Did anyone mention this headline: “The US has 43 nuclear power plants’ worth of solar energy in the pipeline,” [Quartz]?

Once again, the information describes the oil market for traders not investors, and for short term interests not those of long term investors.

Softball specials – One of Bartiromo’s specialties, the softball questioning of CEO’s, [TBusN] highlights the superficiality of most cable business news.  The Velvet Glove, with which the many issues of JPMorgan were handled on CNBC, created the following rejoinder from Bartiromo: “Should we talk about the financial strength of JP Morgan? The company continues to churn out tens of billions of dollars in earnings and hundreds of billions of dollars in revenue. How do you criticize that?” [Reuters]  Oh, how about the following headline from Quartz (Fernholz) “A list of all the reasons why JP Morgan may be facing the biggest bank fine ever,” September 2013?

Great Expectations –  The following sentence, which passes for analysis in altogether too many quarters gives us an example of Great Expectations:   October 23, 2013: “U.S. stocks declined, with the Standard & Poor’s 500 Index falling from a record, as valuations reached an almost four-year high and forecasts at companies from Caterpillar (CAT) Inc. to Broadcom Corp. disappointed investors.” [Blmbrg]  That would be translated as they “missed analysts expectations.”

What were the analysts expecting?  Stop. Think. Apply Felix Salmon’s “weather report” test.  Was the temperature a few degrees colder today than we expected?  Do we blame Mother Nature?  No, in most cases we say that the weather reporter or the agency making the conjectures missed the mark.   Might it be even remotely possible the analysts missed their marks?

In the meantime, there’s better sources of business news available for investors (not traders) thanks to the Internet, but it’s sad that those broadcast outlets aren’t helping people sort the wheat from the chaff.

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