A Grain of Salt

Over the last few months I have been reading, watching, and interpreting financial news and data. Specifically, I turn to CNBC as they have more financial coverage than most people care to even watch. Being blessed with an early retirement, I have the luxury of leaving CNBC on all day while I track stocks from my house. The single most important thing I have learned thus far is that everyone is in the game to make money, and that includes CNBC. Like any other person or entity in sales, they know that the most powerful sales tool that exists today is human emotion. After a good day in the market, the hosts and guests discuss how bullish they are, what companies they bought, and how the majority of good news received that day foreshadows better days ahead. The truth is they are simply feeding into the emotional interpretations of the day. On a good day, greed becomes prevalent while a bad day will yield a healthy dosage of fear. CNBC's shows like Kudlow & Co and Fast Money are perfect examples. About 2 weeks ago Larry Kudlow (staunch conservative) argued that the liberal attempt to link an economic crisis to the Bush (and therefore Mccain/Palin) administration was null and void because the market had hit bottom, financials were in the clear, and it was only upside from there. I am writing this on Sept 15, a day when two of the 4 largest remaining investment banks have disappeared, the Dow dropped 500 points (most since 9/11), and AIG, WaMu and Wachovia look to be next. On Fast Money, the hosts are very careful not to get themselves into too much trouble by not hanging out their necks with predictions, as sound as they may appear. Rather, they feed into the emotion of the day, and prepare to do the same the next day whether greed turns into fear or vice versa. More specifically, three weeks ago the market was up 150 and the hosts pointed to the number of positive data to support their bullish positions for the day. The show made a mistake in asking them to predict the following day's movement and of course all said up. With no significant data released in the following 24 hours the market still managed to turn south. The next day's show fed the fear by talking about negative aspects of the market, what short positions they have taken, and predicting overall doom & gloom. So why do I keep watching? The truth is there is a lot to be learned and gained from every show. The news is excellent, the interviews are very well executed, and Cramer is a nut. While the shows may spin the news to amplify the day's emotion, it remains news nonetheless. However, I encourage anyone that uses CNBC as a source of financial news or recommendations to take what they hear with a grain of salt. They are, after all, a business that makes money when you and I watch as many programs as possible. Plain and simple. And what better way to ensure we watch than praying on the fear and greed that is so easily and fruitfully created by the stock market?

Michael Phelps - Best Olympic Athlete Ever?

Michael Phelps' accomplishments this Olympics have been nothing short of amazing, but we struggle to agree that he should be designated with the title of "Greatest Olympic Athlete Ever." The sport of swimming is quite demanding, but there exist far more opportunities to earn swimming medals than in most other sports. In shooting, there are 9 events in which a competitor can earn a medal. So if a prodigy shooter were to compete, sweep every event and earn 9 gold medals, would he be given the title of "Greatest Olympic Athlete Ever?" We imagine that in a pick-up basketball game one would choose the sprinter who won 1 gold medal over the shooter that won 9. Previously, Mark Spitz held the same title, and it is no surprise he was also a swimmer. It is likely that the media's exaggerated title for Phelps is primarily an attempt to push the forthcoming onslaught of merchandise, but it should be questioned nonetheless. We would like to note that watching Phelps swim was exciting and inspirational. We have no doubt he should be deemed as the most decorated athlete ever, possibly the greatest swimmer ever, but the claim of Greatest Olympic Athlete Ever seems fairly exorbitant.