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"Now... would you like Mr. Wolf to make the autograph out to Richard or Mr. Bernstein?"


Merrill Lynch (ML) smart-guy Richard Bernstein mentioned CNBC's Fast Money in his "U.S. Strategy: Thought of the Day" column last Monday. Actually, he didn't mention the show by name, instead referring to the "renewed spread of brash, fast talking, trading oriented financial television" as chronicled by the New York Times (NYT) that same day.

The exact blurb was this:

Once Again, Navigate the Noise

The New York Times points out today the renewed spread of brash, fast talking, trading-oriented financial television shows, and their increasing popularity. (See "The Brashness is Back in Money Talk, and Also at CNBC", October 2, 2006.). We think investors should be wary of such programming for a whole host of reasons.

In my second book "Navigate the Noise: Investing in the New Age of Media and Hype" (all my profits go to charity), I point out that short-term trading does not build wealth. Of course, there are always the lucky few who do make substantial profits from vigorous trading, but not necessarily skill that produces such profits.

Our earlier studies showed that the probability of making money in the S&P 500 and, for that matter most financial assets other than cash, with a 1-day time frame is roughly 50/50. However, the probability of making money goes up as one extends one's investment time frame. The explanation for this is that fundamentals do not change very often, and investing with a longer time frame allows true fundamentals to come to fruition.

Trading with a 1-day time frame is simply betting on noise, in our view. The odds of making money when trading on a 1-day time frame are probably only slightly better than those at a casino. (Has anyone noticed the spread of poker shows on TV as well?)

After the deflation of the bubble, there was a very brief period during which fundamentals actually pushed noise out of the spotlight. Popular talk shifted to topics like dividends and transparency in corporate reporting. That period seems to be over. Those who today somehow believe that risk aversion is high need only look at the ratings of these fast-talking investment shows to know they are wrong.

As we have said many times, fundamental investing is a slow-moving and rather boring topic, but can lead to wealth building. Noise trading can be quite exciting, but tends to destroy wealth.

- Reprinted from the October 6th edition of Merrill Lynch's US Strategy research report.

he Lone Wolf's Guide to Enjoying/ Surviving Fast Money

I'm honestly not sure if Mr. Bernstein has seen the show. His criticism, or rather that of the collective "we" for whom he speaks, is more of the genre then Fast Money. What's more Dylan Ratigan addressed Mr. Bernstein's review/ warning on last Friday's show. We also invited Richard to be part of the show, but he declined.

I'm wary of defending Fast Money to critics for those and a whole host of other reasons. That said, I could hardly consider myself fast talking or brash if I didn't share a laundry list of exceptions I took to having a scarlet letter (D for "!", in this case) hung on my program.

  • Time frames are greater than one day.

    Four of the six paragraphs in the critique are dedicated to warning readers and viewers against investing with a one day time horizon. An argument against bathing with space-heaters would have been as germane to the program. In the time we've been doing the show, I've had good calls and bad ones but I've never once offered an idea with a one-day hold. The same could be said about anyone on the program.

    A one-day time frame is lunacy on par with the notion of Never Selling a stock while waiting for the fruit of full valuation to hop magically into your checking account (presumably finally allowing the trader to eat). The show is dedicated to people, like the panelists, who invest with time frames somewhere longer than "one day" but shorter than "forever."

  • Fundamentals need not be boring or quiet.

    The show is endlessly focused on fundamentals. Even resident chartist Eric Bolling is forced to emphasize the fundamentals, if only because there are limits to "look at this chart" in a televised format. I honestly can't think of any segments that didn't focus on the fundamentals (business developments, outlooks, economics etc.). Two weeks ago Fast Money was 80% pre-empted while we watched the Hewlett-Packard (HPQ) testimony. After Mark Hurd finished, FM was on the air immediately with a spot assessment ("HPQ and Hurd are fine, Dunn isn't done yet...") which became conventional wisdom in the days and weeks since.

    It wasn't dividends but it was very much in the same coverage area as the "corporate transparency" discussions about which Mr. Bernstein is wistful; despite our not wearing tweed and talking like George Plimpton.

  • Sorry about the fast talking.

    Watching tapes of the show, I too am amazed at how fast I'm talking. The network likes its personalities "peppy;" they stuff us with sugar and Red Bull until we have the collective heart-rate of coked up lab chimps. We're more wired than the '86 Mets but that doesn't make us stupid.

  • When we're wrong, we own it.

    Fast Money makes a point of discussing one losing pick for every winner mentioned on the show. There isn't a stock show or, for that matter, Investment Bank research product (ahem) which offers a more balanced review of its own work.

  • Please don't buy stocks because someone on TV "told you to."

    The idea of anyone, anywhere, buying a stock solely because I wrote or spoke about it is horrifying to me. Fast Money and have very different methods but the same general goal: to educate, provoke thought and share insights. The show and this site also strive to provide some entertainment value as part of the deal.

You can criticize Fast Money for not being to your taste but it's simply uninformed to cite us as a sign of investor complacency. Once you actually watch the show it becomes obvious that, for all of our sins, we are anything but complacent. Lucky though we may all be (and we are), the traders to a person are hyper-competitive types generally appalled by the idea of losing anything, let alone being revealed as an idiot on live TV.

Being risk adverse doesn't mean you don't play at all, it just means you understand the field. At the end of the day, explaining how stocks and markets really work is the daily goal of Fast Money. The show is still being beaten into shape but, at its core, it is very much a reflection of the market animals who make up the regulars.

While I fully expect to be flamed by someone, somewhere, every time I do financial television I'd prefer that those who do it in print endeavor to "Navigate the Noise" down to the essence of what Fast Money is really about before casting the show as a portent of financial doom.

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