The trader mentality that has taken over CNBC (GE) really does far more harm than good to investors. I come from the trader background and do believe there is value to be learned from charts and technical indicators, etc., but one should be clear by now charts are not the end all, be all. Anyone watching CNBC yesterday would be remiss to think our economy was completely and utterly doomed and that’s largely due to the technically driven bearishness that emerges each and every time the market has a down day.
It makes sense that in today’s era of both heightened macroeconomic volatility and the 24-hour news cycle that the focus will be shorter in time duration than ever, but business and economics are grand concepts that play out over the much longer term than CNBC would have you believe today. I knew it was happening all along, but I finally realized that CNBC no longer is a business and economics news network at all, but rather it is completely a channel of traders, by traders, for traders.
Here are the five reasons why this new trader-centric mentality drives me absolutely crazy:
- When the market goes down, even modestly so, we’re heading “into the abyss.” Sure we might be up 13% since the beginning of September but what does that matter when the indices drop somewhere around 1%? The first day the market went down in November we had to withstand that threeheaded monster reserved for the darkest of days that is Nouriel Roubini, Meredith Whitney and Marc Faber. In the morning, when that pretty heat map shows a lot of red then not only can we talk about the market being down, we can literally see it!!! Doesn’t that make everything that much more scary looking?
- Every top is THE top and bottom THE bottom. Anytime the market makes a strong move and looks to level off for some period of time CNBC rolls out one person after the other arguing that that is THE spot where the market won’t move past. There are no rough gray areas because everyone is a macro-trader who knows exactly what the economy is doing at any point in time, and therefore can decide exactly which way each individual stock can move.
- Any market participant is a qualified expert on economics, politics and policy. Many a trader can rant and rave, but few on CNBC have demonstrated any actual depth of knowledge about economics. They can all throw out some nice cliches but how many do you think actually have read anything written by Keynes, Friedman, Hayek, Stiglitz, Minsky, etc.? Granted you wouldn’t expect an “expert” speaking to a less-informed audience to cite to an authority, but you would expect them to move beyond the basic cliches. Unfortunately there is little of that. As far as I know from CNBC, either the economy is crashing or flying and there’s nothing cyclical about it and oh yeah, there’s only one side to the political coin.
- All statements are said in totally hedged terms. It’s always “if we take out this level then we go here…” And while that’s not necessarily a bad thing in and of itself, far too many use it after the fact to say “I told you so.” Nothing moved solely because a level broke. There are far more considerations to the market’s movement than what just a few technical traders see. Remember that big, scary “head and shoulders” pattern from this Summer? Oh that’s right, once that failed none of the hundreds who professed its imminence on CNBC even mentioned it ever again and all were somehow magically loaded long and bullish for the rally.
- There is basically no company specific, in-depth analysis that actually gives insight into longer term investing during the day. Everything is about the “Fast Money” quick flip. There’s certainly room for such types in the market, the role of our capital markets is to efficiently allocate capital for the longer term. Never is that a focus during the day. Here I do owe Cramer some credit (I know I know, it’s popular to hate on him). He is the one personality (yes, he’s a personality) on CNBC who actually digs into the fundamentals (and of late even adds the technical element) to company specific analysis. He is the one person actually focused on building a portfolio to generate longer-term returns rather than just quick flips. Do people there know that stocks are interests in real companies? Or are they just lines on charts?
Do you agree with Elliot? Let us know your thoughts about CNBC in the comments below …