The Financial-News Fad
I believe it was the
transformation of Maria Bartiromo into a household name that told me that
something new was really afoot. Granted, she's only a household name in certain
households, but the 30-year-old host of CNBC's Business
Center
has enjoyed a precipitous ascent up the fame ladder, seeing herself featured in
Newsweek and USA Today and interviewed by David Letterman.
Bartiromo, in short, has been anointed the new face of the new boom in business
news.
The
boom can be seen in the arrival of business news on the front pages of daily
newspapers, the rise of business coverage at mainstream publications like
GQ and Vanity
Fair --and, above all, in the new attention
being paid to television networks like CNBC and CNNfn. The buzz, at least, is
that the growing diffusion of stock ownership has made Americans care much more
about the stock market than ever before, while the uncontested authority of the
free market has placed business at the center of the culture.
As it happens, it's difficult to figure out
whether business news really is much more popular, or whether network
executives and media analysts have just decided it should be . CNBC's
business shows have an average viewership of somewhere between 120,000 and
150,000. The network's viewership peaked at just over a million when the market
crashed Oct. 27. CNNfn, meanwhile, still gets hash marks instead of Nielsen
ratings, which means that its audience is so small that it can't be measured.
And while Moneyline --CNN's 7 p.m. business roundup hosted by Lou Dobbs,
who's also in charge of CNNfn--often draws close to half a million viewers,
that's still insignificant next to anything the major networks do.
Of
course, CNNfn is hindered by the fact that so few cable systems carry it--it's
available in only 8.9 million homes. For its part, CNBC insists that its
audience during the trading day is underestimated by at least 40 percent,
because a significant number of brokers and traders supposedly keep their
televisions tuned to it as they go about their business. This may well be true,
but even if it is, it doesn't tell us very much about the broader impact of the
financial-news "boom," since those analysts presumably have always paid serious
attention to the market.
Nonetheless, it seems likely that the growing
importance of the stock market to the retirement plans of middle-class
Americans has translated into stepped-up coverage of business news and a
greater willingness on the part of mainstream news outlets--daily newspapers
and network television--to showcase pieces on market turmoil. The problem is
that the new wave of business news doesn't really illuminate the workings of
the system all that well. In fact, most so-called business news isn't really
news about business--the creation and distribution of goods and services--at
all. Instead, most of it is "market" news--fruitless attempts to explain what
traders are going to do in the near future, or somewhat-beside-the-point
explanations of why traders did what they did in the near past. If CNBC and
CNNfn are the sports pages of the late 1990s, the way they cover the stock
market is analogous to a football commentator worrying more about a team's
popularity than about its won-lost record.
To be
sure, if you watch CNBC all day long you'll pick up some interesting news about
particular companies and the economy as a whole. Unfortunately, to get to the
useful information, you have to wade through reams of useless stuff, with
little guidance on how to distinguish between the two. The basic reality of an
all-news channel, after all, is that there is a huge amount of time to fill
every single day. As a result, CNBC and CNNfn both offer a hodgepodge of
fundamental analysis, technical analysis, macroeconomic news, trend spotters,
and the occasional hard-news story. A day spent watching CNBC is an object
lesson in what the word "pastiche" really means.
From one angle, of course, this might seem to
be the ideal expression of the supermarket approach to understanding the
world--or, in this case, the stock market. CNBC doesn't offer just one angle on
the market. It offers multiple perspectives, in order to let viewers choose for
themselves. ("I'll have two pounds of technical analysis, one pound of momentum
trading, and a half-pound of fundamentals. Thanks.") So first we get a
"technical" analyst who believes that if you look at the charts of a stock's
movements over the past year, you can discern coherent patterns that will guide
you in predicting when that stock's price is due to rise or fall. That analyst
is followed by another who believes that the key is to seek out and buy those
industries currently in favor with investors. She, in turn, is followed by an
advocate for a more conventional approach: looking for companies with strong
earnings growth that are currently trading at low stock prices.
The
problem here is not that the technical analyst is crazy, although he is. The
problem is that these analyses of the market are presented as if they're all of
equal value--when, in truth, for any one to be correct, the others (with some
minor exceptions) must be incorrect. The network interviewer--often the same
one--talking to these various analysts never says: "Your argument directly
contradicts the one we heard just 15 minutes ago. Why should we believe you?"
Instead, there's just a lot of nodding in assent.
One way of averting this problem would be for
CNBC or CNNfn to feature discussions among advocates of different approaches to
understanding the market. But that sort of open conflict would run the risk of
revealing the inherently futile nature of the project these networks are
engaged in, namely, trying to make sense of the stock market's movement in the
short term. Each day, after all, there are lots of different reasons why the
market does what it does. But you'll never be able to summarize them all--and,
more importantly, whatever reasons you find today aren't going to help you
understand what the market will do tomorrow. In the short term, investing is
really just a random walk.
What's really wrong with
the financial-news boom, then, is that by creating the illusion that the walk
is other than random, it depends upon and encourages a trader's approach to
investing. The point of having a stock market, after all, is not so that people
can buy Intel at 72 when it's on its way up and sell at 76 to reap a quick
profit. The point is that investors are supposed to direct capital toward
companies that will make productive use of it and direct capital away from
companies that will not. Just as index-fund investing defeats this purpose, so
too does trading based on anything other than an evaluation of a company's
underlying prospects for the future. That's why ideally CNBC would feature
nothing but informative pieces on publicly traded companies, with occasional
glances at the overall economic climate. Of course, its ratings would soon be
turned into hash marks. Which might suggest that real business news is
no more popular than it ever was.
