Tuesday, September 20, 2005

CNBC's Economic Illiteracy

I am only 31 years old and admittedly have so much to learn. But all day I listen and watch CNBC reporters 10-20 years older utter such ignorant tripe that I have to constantly hit the mute button.

Just last week, anchor Ted David said,

"...it took thousands dying in New Orleans to..."

Hey Ted, the number is well under 1000, "thousands" would imply at least 2,000.

CNBC was promoting a segment later in the day,

"With the rising cost of healthcare, who should pay? The worker or the employer?"

One would think that CNBC, a putative business channel, would be able to see beyond trite socialist argumentation. Even if the employer paid it all, it would still be borne by the employee in terms of lower raises and fewer employees. It is a stupid question that I would expect more from econo-illiterates than CNBC.

The real question is how can we lower healthcare costs (for everyone)?

Yesterday, CNBC had a guy on who claimed there was no housing bubble because house prices are based on the affordability of monthly payments and not on sticker prices. You would think they might ask him about adjustable mortgages, interest-only loans, and over-leveraged borrowers but there was no such probing.

What about the cost of heat? Everyone in the northeast is aware that at today’s energy prices, it may cost twice as much to heat their homes this winter. My guess is that 2000 square feet cost about $4,000 a year to heat (I have to check this). Doesn’t this raise the monthly cost of home ownership?

These questions were only raised in my living room.

This same boob said that home prices in the cities (unlike the rest of the country), San Francisco, Los Angeles, New York, and Boston will not come down because there is no new supply in these cities. It is funny because many others have said the opposite – that home prices in the non-coastal regions are more stable because they are insulated from the urban home price bubble.

Everyone has a favorite self-serving canard that their home won’t decline in value.

Amidst the no-profit internet tech bubble, Coca-Cola hit $85 a share in 1998. I remember hearing how Coke was a real company, with real earnings unlike those bubbly tech names – no way it could go down. Here we are 7 years hence and Coke stock is still worth half of its 1998 value.

Likewise Home Depot is 45% off from its 1999 high. Not even this massive housing bubble could get Home Depot close to it former highs, no matter how “insulated” it was from the dot-com bubble.

Some dummy said to me the other day (he just bought a house here in Massachusetts) that home values are safe here because there are so many colleges and thus there will always be people that want to live here. Hey dummy, not if they leave because they can’t find work or can’t afford to live here. Also, there has always been many colleges here – so that is already been priced into the market. You didn’t unearth that fact.

Back to CNBC. Every time they interview an oil trader the first question they ask is always about OPEC. And every single time, the trader tells them that OPEC is irrelevant and that they pay no attention to what OPEC says. These traders think about, watch, and trade oil all day for years. Furthermore, most of them risk their own substantial money on their “opinions”. Yet almost daily, CNBC talks about OPEC - so much for CNBC being a learning organization. They would rather speak the lexicon of econo-illiterate “economists”, politicians, and sheepish fund managers.

CNBC will put any boob on TV if they meet their criteria. They have to have some high falutin credentials and or maybe the requisite smile and ability to utter cliched sound bites.

They used to interview some guy from Tahoe Trading, an options trading firm on the American Stock Exchange, to get his take on the day's market action. I knew a guy that worked with him and every time CNBC put the dolt on TV, I would get an instant message from his co-worker telling me how much money the guy was currently down. His trading deficit of around 300k didn't prevent CNBC from giving him international air time. At least he looked and sounded smart.

Another pet peeve of mine is the term “profit taking”.

Whenever a security or commodity falls in price the clueless news anchors attribute it to “profit taking”. But there is no such thing as “loss taking”. Presumably all people do is make “profits”. Did Enron really go to zero because of “profit taking”?

This comes from the media’s incessant desire to inform and explain. The problem is that most security price movements are beyond the ken of pundits. Trying to explain the unexplainable isn't just shoddy journalism, it is intellectual arrogance.

I don’t care if CNBC is owned by the great General Electric – the TV producers leave a lot to be desired.

Another thing about Katrina, I haven’t heard one person correct the spurious claim that Katrina will cost more than 9/11. What everyone is forgetting (or more likely ignoring) are the hundreds of billions (maybe a trillion) lost in the stock market after 9/11. Maybe it was just innocuous "profit taking"?

Katrina didn’t move the stock market one bit, nor should it have.


The Zoner said...

Awesome post. Caught your web add. from Buzz Machine comment. Good stuff.

The Zoner

Anonymous Person said...

Same here, buzz comments, great blog.

Anonymous said...

With rising health care costs it does come out on the employees and something should be done to help lower costs.