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Responsibility in Financial Media

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"Was it irresponsible to bet Superfly's college fund on the Super Bowl even if he took the Steelers?"

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Minyan M "R" V writes:

I don't understand this justification of (Financial media Personalities) recommending buying Google (GOOG) prior to earnings announcement. The idea does not fall in the category of prudent investing but is more like playing the roulette in Las Vegas with the same odds. What amazes me even more is your saying it is down only 10%, as though that wasn't a big deal.

Now if an individual investor, without your presumably deep pockets, stupidly bought 1,000 shares of GOOG right before earnings (heaven forbid not at $470) he would be sitting on almost $33,000 loss on his Google vs. approximately $3,200 loss on 1,000 shares of GT.

This is real money for ordinary folks which they use to pay bills.

The majority of the money managers (owning Google) will get paid millions even if they lose their clients' money as long as they beat the benchmark!! Let them justify their trades but let us be real. To try to minimize an individual's actual huge loss of capital is totally irresponsible IMHO ("in my humble opinion").

For everyone's sake, I hope they announce add of GOOG to S&P 500 so that the craziness and euphoria can return to Wall Street.

Regards,
MV
(net short GOOG since 470, covered half last evening)

RV,

I've sat on your much-appreciated email since last Wednesday. Not because of my (irresponsible?) sloth, a desire to downplay my (1) prior (2) relationship (3) with (4) Google, or because I'm just a slightly overgrown pussilanimous thin-skinned sissy afraid of a little heat.

I sat on it because you've touched on a vast array of nerves and larger philosophical questions, all inextricably linked to my raison d'etre as a stock-writing and talking person. Your note is to a much greater point than the question of whether or not I can possibly claim to have any sort of soul or humanity whatsoever when I have discussed a stock like Google favorably in a public forum in which my words may have influence (indeed, in a forum in which I clearly strive to have influence).

Which is an over-wordy, navel-gazing way of saying "I've got some things to get off my chest and they don't have much to do with 'stocks' in general, let alone Google in particular. There will (probably) be a 'point' but I'm taking the long road to get to it. I'm speaking only for myself, as should always be understood to be the case when I take these little editorial off-ramps."

Television: Outrageously Bad Since Inception!

I get more out of Chirstmas now that I'm a parent and no longer have the pressure of pretending to believe in the whole Santa thing

Just because I know that Christmas doesn't magically "happen" without daddy laying out a meaningful amount of coin doesn't mean I can't enjoy the experience. I honestly enjoy the creative exercise of putting together a maddeningly fragile train set and think the inevitable destruction of same within minutes is deeply amusing, in a "Blondie and Dagwood" mundane way.

Of course the train broke, we left two presents in the closet for over a month (thankfully not the new puppy) and the three year old already seems deeply skeptical of the whole Santa Claus legend. The inevitable train-wrecks are part of what keeps the journey interesting.

I don't wake up on Christmas morning expecting to find presents of magical origin in my house and I don't turn on my television expecting to see all-knowing financial advisors imparting flawless wisdom. In all candor, I would be less surprised by the discovery of a Christmas gift miracle than I would be to find anyone ominiscient about the market. For that matter, I don't think anyone on CNBC or any other major financial television network is claiming omniscience. I think the network, like all networks, is trying to create informative and entertaining programming appealing to the broadest possible group of people.

Some of what they do towards that goal is good and much is bad. But to find it irresponsible is to go down the same logical road as those who worked themselves into a frenzy over seeing a blurry glimpse of an aging pop-star's breast during a Super Bowl broadcast. As a married guy I may have missed an outbreak of nipular throwing star injuries after Janet "Miss-Jackson Cuz She's Nasty" Jackson took the liberty of injecting sex into our national sporting violence fix, but I don't think so.

While I congragulate you on your "Great and getting better" Google short position I would offer that plenty of very smart folks have been vaporized shorting Google before you got there. They had much the same logic as you did but were wrong (see also: "Early", "Impatient" or any other euphemism). Whether or not they were "responsible" to themselves or their hypothetical fiduciaries is strictly a function of their entire portfolio, about which I can reliably infer nothing simply by knowing if they were long or short Google.

Google is up over 4-fold from the IPO price. They may or may not give all of those gains and then some back but, at least as of this moment, folks who have been playing it on the short side, as a group, need a lot more protecting than those who foolishly/ recklessly/ naively/ cleverly bought the IPO and "threw it in a drawer".

The job is to make money, not protect folks on the other side of your trades.

It's About the Questions you DON'T Ask

Much financial television is innane but it's not irresponsible. The problem isn't one of recklessness or malice. You can assume everyone on television has a vested interest in whatever they are saying; what they still have in common is the desire to be proven right (being revealed as an idiot defeats other ulterior motives). The issue is an absence of any critical depth and a lack of platforms to have anything rich enough to add value to anyone actually doing this for a living while limiting the entertainment/ educational value for all.

To name names by way of fresh example, North Carolina State Treasurer Richard Moore was on CNBC, giving his 2-cents on the actions at General Motors (GM). Now, the problem with the segment wasn't that Richard Moore was irresponsible to offer his opinions. He allocates a state pension and is running for governor, making him "available" for television spots.

The problem with the segment was that there's no actual evidence to suggest that Richard Moore would have any idea of how to help GM, let alone the only slightly related issue of helping GM's stock. He isn't a trader of any sort. What could have made a more interesting segment would be having someone there to ask a question along the lines of "couldn't it very well be the case that the best thing for GM and its stock would be closing every single plant in the United States. At what point does your responsibility to the working voters of North Carolina conflict what you claim to be advice in the best interest of shareholders as a whole?"

Treasurer Moore may have had a great answer to that question or it may have thrown sand in his mental gears. Either way, we would have learned much more about what makes him tick had the question been put on the table.

In any event, neither Richard Moore nor Jeffmacke can logically be held responsible for someone who recklessly levered themselves up to buy GM stock because he mentioned the company on TV and I mentioned GM here. GM exists without Richard and folks would trade Google even in a world without Jeffmacke.

As I can only speak for me, I was stopped out of Google yesterday (after it broke the PnF levels discussed by Prof. Depew in the Buzz). It was a losing trade but the financial risk was small and I explained what I did to control that risk along the way. I'm not sure if I was "responsible" along the way but the feelings through the experience (deep irritation and suffering) were exactly the same as those I get when I do unquestionably responsible things so I'm calling it good enough.

Refusing to address popular corners of the financial market which I or others selectively deem to be distasteful or reckless strikes me as at least 50% again too judgemental. I think everyone involved in the financial markets is doing the best they can while engaged in a task where outcome is often a function of luck as much as skill. The risk can be mitigated by calling on the collective backgrounds and experiences of investing professionals but it can never be eliminated. I would argue that any show which felt the need to repeat phrases like "remember; don't accidentally buy 10x the dollar value of Google accidentally because you didn't realize it was a $400 stock" would be so unwatchable and actually much more offensive than a program assuming some rudimentary knowledge of stocks and "numbers".

If the standard before speaking in public was certainty than the only people making noise would be the liars and the lunatics. Since the standard is much lower than that, the responsible course seems to be laying it out there in an honest way and calling it how we see it, as best we can.
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No positions in stocks mentioned.

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