Sex, Lies, and the Financial Media

“I’m scared to death of stocks right now,” says Brian Smallsaver, a 20-something programmer and social media influencer. “And what’s the deal with bonds? Aren’t they supposed to save my bacon when stocks get creamed?”

“A lot more air’s coming out of the market’s tires,” says Fritz Mozillo, economist at Jones James, an independent brokerage firm headquartered in Boca Raton. “We’re telling clients to batten down the hatches and keep a sharp weather eye on the Fed.”

One casualty of the recent turmoil in both the stock and bond markets has been the traditional 60/40 portfolio, which an increasing number of observers consider obsolete. One of them is Frederick Fintwinch, chief portfolio manager at mutual fund giant GreenStone, who told me via email: “The conventional asset class correlation grid has gone to 1.0, and you’ve got to think outside the investables box.” He recommends prize llamas, rare Prussian postage stamps, and celebrity belly button lint.

I reached out to Dermot Landsdale III, CEO of Gigantic Global Capital, who conveyed even deeper worries from the World Economic Forum in Davos: “What we’re seeing now is a titanic battle between buyers and sellers, compounded by central bankers around the world who have deployed a dangerous mix of pushing on a string, trimming their sails, and mixing their metaphors.”

Retail investors have become increasingly distraught at the lack of shelter for their shrinking portfolios. Retired 79-year-old dentist Percival Sweedlepipe had placed most of his IRA assets into the Dolittle Technology Fund and feels betrayed by the media’s breathless coverage of its manager, Fred Wopsle: “If you can’t trust The Wall Street Journal, The New York Times, and Kiplingers, who can you trust?”

This piece, a mash-up of several articles from the business sections of national newspapers from 2022, is recognizable as satire only because I made up the companies and stole half the surnames from Dickens. (OK, that and the belly button lint.)

Such articles have been a staple of workaday “financial journalism” [this publication excepted] for at least the past few centuries; they usually contain three elements:

1. General assertions about the emotional state of the market, most commonly the distress of retail and/or institutional investors about recent losses or, during frothy periods, how the financial mood is “risk on” or, even more jaw grindingly, that “cash is coming off the sidelines.” (The latter defies simple accounting. If Bob pays Betty $1,000 for her stock, Bob’s $1,000 indeed came off the sidelines, but Betty just sent her $1,000 back to the sidelines.)

2. The portfolios and transactions of uninformed small investors and the pleasure, pain, frustration, and triumph they experience in the process.

3. The observations of professional money managers and market strategists, whose forecasting skills rank somewhere between that of a cuckoo clock and a ham sandwich. After all, if they really could predict market direction or pick stocks, they wouldn’t be giving their calls and picks away for free in a national publication.

In 1998, financial journalist Jane Bryant Quinn published the seminal criticism of the swamp of modern financial reporting in the Columbia Journalism Review. She famously described its content as “financial pornography”: investment coverage that perpetuates the myths and false promises of stock picking, market timing, and asset allocation fairies – experts who supposedly able to supply profitable advice in these areas.

Quinn had a lot more on her mind than small investors and brokerage BS artists. She began by identifying the financial press’s fixation on celebrityhood: “Many business journalists, I fear, have left home and joined a cult. Our Bo and our Peep are Buffett and Gates. We hang on their words as if they are wise…”

She went on to eviscerate her colleagues, and quoted the confession of one of them, “By day we write ‘Six Funds to Buy NOW!’ We seem to delight in dangerous sectors like technology. We appear fascinated with one-week returns. By night, however, we invest in sensible index funds.” The piece continued, “We were preaching buy-and-hold marriage while implicitly endorsing hot fund promiscuity.” Why? Because, “Unfortunately, rational, pro-index-fund stories don’t sell magazines, cause hits on web sites, or boost Nielsen ratings.”

If the financial print media is a swamp, then the financial electronic media is a sprawling sewage plant, headquartered at CNBC. If it’s impossible to write a new and useful personal finance piece five days a week, the impossibility of coming up with a dozen hours of relevant cable TV financial content every day boggles the mind.

Before the 1990s, financial television was a backwater, whose minuscule viewership bankrupted, for example, the Financial News Network (FNN), which then fell into the hands of NBC, which rebranded it, under the aegis of Roger Ailes as the Commercial News and Business Channel (CNBC). Ailes applied the lessons he’d learned in political advertising for, among others, Richard Nixon and George H. W. Bush, to overhaul every aspect of the look and feel of the network. Instead of simply announcing a news segment with theme music, he added voiceovers with tight head shots of the anchors. He personally instructed camera operators on how to properly frame corporate executives to make them appear more alive, prodded writers to come up with more compelling “don’t touch that channel” patter, and sent anchors to breathlessly report the price action from the floor of the stock exchange.

The more flamboyant the guest, the better. As the New Yorker’s John Cassidy wrote, “Their ideal studio guest was a former beauty queen who covered technology stocks, spoke in short declarative sentences, and dated Donald Trump. Since there weren’t many of these women available, the producers generally had to settle for balding, middle-aged men who revered Alan Greenspan and tried their best to speak English.”

Ailes single handedly transformed finance into a spectator sport. He intuitively understood that his audiences preferred the cotton candy of entertainment to the spinach of information and analysis. The best confection of all was one that spun unlimited wealth. He also married sex and finance by making a new recruit from CNN, Maria Bartiromo, an anchorwoman. Her Sophia Loren looks, dense Brooklyn accent, and blatant sex appeal transformed her into “the Money Honey.”

Under Ailes, CNBC mastered that genre and perpetrated a feat of modern cultural alchemy by transmuting the tedious world of mainstream finance into wildly successful entertainment. The new venue’s attention centered on the internet, which small investors could then use to trade on the “information” they inhaled on CNBC.

How well does this work for investors? About as well as you might expect.

One academic study examined the reaction of stock prices to the appearance of corporate CEOs on CNBC, while another researched the performance of the stock picks of the hyperkinetic, wildly popular Jim Cramer on his Mad Money show. Both studies showed a price bump relative to the rest of the market that peaked on the day of or the day after the show airs, followed by a price fall.

The price fall after the show is discouraging enough, but the rise beforehand suggests something more sinister – that participants with foreknowledge of the show’s schedule of guests play CNBC’s viewers like two-dollar banjos.

What about social media?

Modern social media is for the most part an echo chamber time suck, although if you’re extremely careful and lucky, Twitter is (or at least was) often the first place that useful financial concepts and data see the light of day. In general, though, the odds of finding useful information on this 280-character platform are approximately the same as those of finding a Higgs boson under your sofa.

Avoid TikTok, which seems almost exclusively aimed at the very young and uninformed. The same will probably go for whatever platform has come into fashion by the time you read this. Look elsewhere.

Here’s what my media diet looks like: I subscribe to The Journal of Finance, American Economic Review, and Financial Analysts Journal, and scan several other peer-reviewed journals online. If you don’t have the time for that, the Economist does a pretty good job of keeping up with evidence-based finance, and has a superb podcast series, Money Talks. Despite the fact that Youtube suffers from the “three degrees of Alex Jones” phenomenon (three clicks after learning how to change your lawnmower spark plug, you find out that 9/11 was a CIA setup), it’s an invaluable source of high-level lectures by finance’s best and brightest, starting with Fama, Shiller, Bodie, Samuelson, and Buffett. I’m sure that readers can suggest other useful sites and look forward to your recommendations.

There are a few mass media columnists worth reading, starting with Jason Zweig, Jeff Sommer, Ron Lieber, and Tara Siegel-Bernard, but as a general rule, the less biz section reading you do, the better off you’ll be.

Financial headlines are of real value, for the simple reason that if it’s above the fold, it’s already been impounded into prices, and so you can safely ignore it.

William J. Bernstein is a neurologist, co-founder of Efficient Frontier Advisors, an investment management firm, and has written several titles on finance and economic history. He has contributed to the peer-reviewed finance literature and has written for several national publications, including Money Magazine and The Wall Street Journal. He has produced several finance titles, and four volumes of history, The Birth of Plenty, A Splendid Exchange, Masters of the Word, and The Delusions of Crowds about, respectively, the economic growth inflection of the early 19th century, the history of world trade, the effects of access to technology on human relations and politics, and financial and religious mass manias. He was also the 2017 winner of the James R. Vertin Award from the CFA Institute.

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