Time to Turn Off that Business Channel

The NYT today has an interesting article on the financial media. The article was sparked by the appearance on CNBC of "Dr Doom" Nouriel Roubinni and "The Black Swan" (and my favorite financial author, Naseem Taleb ( you can view the video here on you tube). The happy talk folk on CNBC especially the insipid perma bull Dennis Kneale tried to spin the analysts to see the glass as half full but neither would have any of it. As Roubbini has said on other occasions "the light at the end of the tunnel is an oncoming freight train".

The reporter David Carr writes of the exchange

Last Monday on “Power Lunch” on CNBC, there was a segment that many people noticed and passed around the Web. Under the rubric “Turning the Corner,” Bill Griffeth and some of his colleagues were interviewing Nouriel Roubini, a professor of economics at the Stern School of Business at New York University, and Nassim Taleb, a derivatives trader, author and theorist about randomness.

Mr. Griffeth started things out briskly by saying, “What would it take to make you bearish on this economy right now?”

You mean bullish, his co-host, Michelle Caruso-Cabrera, interjected. They cracked wise about Freudian slips, but the entire segment, it turned out, was about trying to somehow find the horns of a bull on two ferocious bears. ....

“But that’s not the end of the world, is it?” Mr. Griffeth asked plaintively. Mr. Roubini indicated it was sort of getting there, with a recession that will be three times as long and three times as deep as the previous two.

Sensing the thickening gloom, Mr. Griffeth pivoted away to Mr. Taleb and said, “You’re not as bearish as Nouriel, are you?” Well yes, as a matter of fact he was. “We have the same people in charge, those who did not see the crisis coming,” he said.

In studio, Dennis Kneale of CNBC broke in and said, “Let’s get back to the real purpose of doing this, because we know the forecast is dark and continuing dark,” and then went on to fish for one metric, any measurement, that suggested the economy was “turning the corner.”

His guests did not play ball, and later they looked slightly aghast when asked what they would invest in and what was in their portfolios

The article's larger point is the built in bias for optimism in financial journalism. Most importantly it includes some sage advice on fixating on the kind of material fed on business news outlets that need to constantly churn out material:

Dave Kansas has been covering personal finance for decades. He currently works at FiLife, a personal finance site jointly owned by IAC/InterActiveCorp and The Wall Street Journal and just published a book, “The Wall Street Journal Guide to the End of Wall Street as We Know It.”

“I try not to watch CNBC. I don’t keep a TV near my desk because I don’t want to get caught up in the hourly changes. The idea that you can pick stocks and beat the market is sort of silly no matter what kind of market you are working into,” he said. “Bernie Madoff was able to deliver steady returns, but we know now how he did that.”

The whole tidy ecosystem of cause and effect — the belief that there is something rational and meritocratic about high finance — has burned away along with the billions of dollars spent to bail out its chief practitioners. When the reporter on the radio says, “Stocks were down 2 percent on news that the jobless figures were worse than expected,” is there any reason to believe him?

“The headline that you will never hear is ‘The market was down 110 points, a random fluctuation in a very complex system,’ ” said Eric Schurenberg, the former managing editor of Money magazine who is busy building — get this — a financial Web site for CBS. “No one has ever known what was going to happen, but there is this temptation to act like you did. But that fantasy has been exploded.”

(the above strikes mea rather ironic comment by the former managing editor of a magazine that purported to do exactly that)

the article concludes with some simple and useful advice on business journalists and long term investors:

To engage their audience, business journalists need to act like things are changing all the time. As it turned out, what didn’t change much was the fundamental lessons: have a diversified portfolio, don’t buy more house than you can afford, don’t take on more debt than you can support, or trade on the margin.