My previous career in public affairs left me deeply skeptical about the broadcast media. Everything we see in the media is shaped by the motives and biases of dozens of people, from owners to reporters to "guest analysts." They each have a reason to spin you.
Something's rotten in the studio
Years of watching CNBC all day left me with a nagging feeling. The network covers the major market news and interviews a reasonable range of guests, but something still rubbed me wrong.
Then it hit me. All those people chattering away about the markets, ostensibly for my benefit as a viewer/investor, are nothing like me at all. The financial TV game exists primarily to reinforce Wall Street's basic philosophy: The ordinary investor can't know anything or hope to succeed in the markets unless an "expert" explains it first.
Can "experts" with such different interests and institutional backgrounds offer useful investing advice to an independent retail investor?
Let's take a look at the players in the CNBC game and what motivates them the most.
The people behind the curtain
NBC and General Electric (NYSE:GE) own CNBC. Like all private-sector media, CNBC exists to garner ratings and make a profit by selling advertising. That was easy during the stock market bubble. But once the bubble burst and the average viewer hated stocks, the network had to shift gears to survive.
CNBC thrives today because its modest audience, in the low six figures at best, is one of the wealthiest demographics in the television universe. No other channel or program draws such a beautifully self-selected slice of the affluent and wealthy. The dramatic increase in CNBC's fluffy feature reporting about real estate, travel, golf, etc., is aimed directly at its target demographic.
Which probably isn't you, unless you are lucky enough to occupy the top U.S. income percentile.
The CNBC presenters and reporters talk about their concern for the average investor. Who knows, maybe they believe it. But let's face it, the CNBC on-camera staff isn't even allowed to own individual stocks most of the time. So they have no stake whatsoever in whether the market goes up or down. From David Faber's seven-digit superstar salary on down, the CNBC gang is going to get a nice paycheck every two weeks whether you make money or not. They don't have any "skin" in the game. They just want you to stay tuned in to watch the commercials that pay their salaries.
When Mad Money and Fast Money are the most-plugged shows on the channel, you know they are aiming to push your emotional buttons, not teach you about real investing.
The market as spectacle
Cheerleading positive economic news also seems to be mandatory for the "gang." The day an analyst said $100 oil was possible, the CNBC anchors were apoplectic at the mere suggestion that oil prices might not go down after scaling the scary $50 barrier.
Let's look at CNBC's guests. Every day, there is a "guest host," typically the chief investment officer from one big brokerage house or another. The hosts are there to tell you "what's going on in the market" and how their institutions are playing it.
If you think they tell you what they tell their top clients, you are kidding yourself. And don't bother trying to use their pontificating to shape your own portfolio; the advice is contradictory from day to day, and usually so vague that the best you could do would be to trade around various market sectors with ETFs according to their predictions.
Ever notice how the guest host's actual track record is rarely, if ever, mentioned?
Imagine if every CNBC guest had a graphic flashed under his name showing his net worth, current salary, and portfolio management results for the last five years. Joe Schmo at home might see that Blah-Blah Hotair, chief investment officer for Big Fat Brokers, is worth $15 million, that he makes $3 million a year base salary plus a bonus (often more than his salary), and that BFB's flagship mutual fund has barely kept pace with the S&P500 over the last five years.
Who would listen to him when he says to dump your value stocks and buy semiconductors instead? It would be obvious that he has no reason to care if he is right or wrong. Blah-Blah Hotair will still make a fortune this year, just like he does every year. How you do is irrelevant.
You can make lousy predictions for years on Wall Street and still get invited to be on talk shows.
On the flip side are the guests from small "boutique" brokerage and analyst firms. You might be shocked to find out that a particular "expert" only founded his firm a year ago, barely breaks even, and never made his own fortune in the market. He's just trying to get airtime to boost his image and bring in more clients. But you'll never know he's just a wannabe. CNBC won't tell you.
The network also won't tell you why a "chief investment officer" who used to be with one brokerage house suddenly shows up representing another firm, sometimes his third or fourth in as many years. Was he promoted? Was he fired? It's a mystery.
The sell-side analysts who got in so much trouble when the Internet bubble burst are much more reputable now. The institutional pressure for them to hype particular stocks is largely gone. My beef with analysts is that understanding a certain industry may tell you little or nothing about how specific stocks will do. But they are worth listening to just for the wealth of information they will give you on industry developments.
The corporate CEOs who come on as guest hosts usually come from successful companies that the CEOs are happy to talk about. They know their industries inside and out, and their views on the broader economy are a refreshing change from the usual economist blah-blah or a chief investment officer's spin.
What's missing?
But who do you never see on CNBC, or on any financial talk show? Ordinary investors. At best, CNBC might set up a camera at an investment club and pose a question like, "We got together and decided we like Pfizer (NYSE:PFE). Do you agree?"
More blah-blah. Let's face it, most of CNBC's target demographic, the really rich viewers, don't buy and sell stocks directly. They have brokers and managers and hedge funds to do that. CNBC doesn't have to care what average investors say, think, or do, because they stopped watching in 2000.
Books on investing are pretty much the same. Reading about a famous fund manager tells you very little about how to manage your own portfolio. Ditto most of the financial magazines. Smart Money has more useful investing ideas than most. Money is the worst, almost comically awful.
I listen to CNBC in the background all day to stay on top of the news flow. But my eyes are glued to my PC, looking for news and information to evaluate on my own and searching for the few wise voices in cyberspace that may have something relevant to say to ordinary investors like us.
I sure won't find that anywhere on TV.
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Fool contributor Dale Baker, a private client portfolio manager and former U.S. embassy public affairs officer, doesn't own shares in the stocks mentioned above. He is very good at listening to the TV without hearing much, and welcomes your questions or comments. Pfizer is a Motley Fool Inside Value pick. The Fool is investors helping investors.
