As Seen On TV
Sungarden Investment Research
By Rob Isbitts
August 29, 2013
For years I have been asked what I think of financial television. My typical response: reporters and entertainers are not fiduciaries. That is, they are not in the business of making you more successful. They are in the business of driving higher rates for advertising dollars for the network. Thatâ€™s the game, thatâ€™s it.
If a TV market pundit tells you to invest in something, they donâ€™t know a darn thing about you. If someone in my industry tried to do that, weâ€™d be taken out back by our regulators and shot (see the â€śknow your clientâ€ť guideline). And if we spoke in absolutes (â€śthis is going to happen, I guarantee itâ€ť)? Weâ€™d be shot a second time, just to make the point. I hope I have made my point.
Why am I so jacked up about the media? For one, the marketâ€™s narrow range since early May produces a sort of cabin fever in professional investors as summer draws to a close. Also, I have been exercising more and I often watch live business television or video recordings of the same when I exercise. Why do I watch? Because I know that many people do and I want to help them separate reality from hype.
Sometimes I donâ€™t know if the stress relief of working out is exceeded by the stress induced by watching investing, a very serious and hard-working personâ€™s activity, turned into a carnival act.
Here are a couple of recent examples which inspired me to write this blog post.
- TV evangelist Jim Cramer was discussing his 10 rules of investing (obviously shortened from the 25 rules of investing that appear on one of his websites). Rule #4 was simple: â€śdiversify.â€ť Rule #6 was â€śdonâ€™t own too many stocks.â€ť Huh? Are we supposed to figure out how to toe the line between those two ideas? Or, as Chevy Chase once said while impersonating President Gerald Ford at a Saturday Night Live version of a national debate, â€śI was told there would be no math today.â€ť
- The mediaâ€™s urgency to convert the routine into exciting and panic-filled moments is more laughable than it is obnoxious. One recent interview featured a regular guest of the network, who said in a morning interview that he thought the stock market would fall by 20% before the end of the year. Later that same day, this pundit (who apparently has a very good publicist) was told by the host that â€śthis morning you predicted a crash.â€ť The guest responded by saying that he did not predict a crash, he said a 20% decline was possible. I see his point. 20% corrections are part of a market cycle. A crash is sudden and acute. This kind of thing, turning a statement into â€śbreaking newsâ€ť is getting tired.
- Whatâ€™s my conclusion? Watch financial television but do so with extreme skepticism. They are not fiduciaries and they have a lot of people running teleprompters to make them look as smart as possible. Really, I guarâ€¦on second thoughtâ€¦
(c) Sungarden Investment Research