Real Talk
CNBC Demystified

Real Talk
CNBC Demystified

Doug Litowitz

[Editor's Note: Accountability was a central theme Modern Trader's first headline article False Prophets. The staggering lack of accountability when it comes to the quality of financial insight and market recommendations has fueled many different reactions. Today, our friend Doug Litowitz offers his assessment of CNBC, a financial news channel that has been central to the argument on why market commentary requires greater credibility, accountability and actionable insight. His opinions are entirely his own.]

June 24, 2015

CNBC Demystified

CNBC presents a paradox in the hedge fund community.

It plays constantly, but hardly anybody watches it.

The channel mostly functions as white noise emanating from wall-mounted monitors on trading floors and in financial firms.

Given its ubiquity, one might think it was highly regarded.

But traders and portfolio managers treat CNBC with scorn or indifference.

Few rely on CNBC for market information, preferring Bloomberg terminals or proprietary data sources.

The situation resembles George Orwell’s Nineteen Eighty-Four, where the protagonist Winston Smith tuned out the massive telescreen on his apartment wall that issued endless streams of positive news.

As an experiment, I polled several friends who have a combined 100 years of experience in hedge funds. They couldn’t recall anyone saying, “I just got a game-changing idea on CNBC.” And during rare mentions of the channel, the commenter opines on the female anchors’ attractiveness or the quality of the male anchors’ suits.

According to Nielsen, CNBC commands a market share many multiples of its nearest competitor, Fox Business News, and perhaps a dozen times that of its second competitor, the more elite-minded Bloomberg Television.

This is puzzling. How can something so unpopular be so popular?

The answer is complex, and requires a deep dive to find CNBC’s true purpose.

CNBC is a news show, or in other words, it is supposed to provide content, information, and stock market advice.

By journalistic standards, it falls short of its task.

Interviews feature softball sessions bordering on hero worship. The recent coverage in Davos at the World Economic Forum was shameless. Too often, CNBC accepts a devil’s bargain where they gain access to market leaders in return for tacit agreement to refrain from tough questions.

The ‘experts’ are self-anointed. Their predictions are never back-tested.

And whatever news it provides is already stale to market makers.

The screen is full of dizzying information without meaningful analysis, and commentators never broach broader social issues. A hollow, unconvincing conviviality prevails among its anchors, and whenever the market goes down or a guest becomes bearish, the anchors turn incredulous, brittle, defensive, and dumbfounded.

Last Fall, the anchors turned aggressive on Peter Schiff by forcing him to admit he wrongly predicted that Gold prices would rise, and he had to defend himself by noting that he was correct about predicting the housing crisis while CNBC was busy cheerleading. Exasperated, he said what everyone is thinking: “All you do is parade people who are wrong.”

Judged as a news show that is supposed to report objectively on the economy and the stock market – it is grievously flawed.

But at a deeper level, below consciousness, CNBC serves an indispensible shamanistic function, providing a kind of ideological placebo that calms everyone down by offering a series of comforting myths.

At this, it succeeds wildly.

Recall that the function of a shaman is to give puzzled victims a narrative framework for redemption, a story in which their afflictions can be warded off, and blessings bestowed, if they perform a certain ritual, or appease a demon, or ingest a magical substance. A person who consults a shaman does not seek evidence or back-testing. He wants a comforting myth that casts himself as master of his destiny when things go well, and as a blameless victim of the gods when things go wrong.

CNBC is an electronic shaman for investors.

Even with the sound turned off, it sends the underlying message that a master plan exists and we can find redemption in the markets, that there is a golden thread, a controlling logic to the chaos and indeterminacy around us. When we make money, it is because we have been wise and followed their sage advice. And when we don’t make money, when they fail to predict the next collapse, there will be no one to blame, because it was due to unforeseeable and mysterious forces.

This is what we want to hear.

All of us – from amateur investors to the greatest traders at the best hedge funds – on some unconscious level want to believe this. It is not simply that we want to hear that market indexes are rising; that may or may not be good news depending on one’s positions. Rather, we want to hear that whatever our strategy happens to be, there are well-dressed, positive, cheerful and confident people telling us that destiny is in our hands, and that the dream is within reach.

No one wants to hear that we are throwing hard-earned money to the cruel winds of malevolent and opaque forces, that billions, even trillions, are sloshing around vulnerable to unstable geopolitical and sociological events that defy rationality, or that fortunes can be won or lost because of some freak tragedy.

No one wants to hear that the market is propped up by the Federal Reserve, or that we are irrationally exuberant, or that earnings guidance is low-grade fiction.

We want to be reassured by serious men and women in suits who tell us that events are looking up, that problems are solvable, that the market is rational, that we are scientists, not gamblers.

And most important, we can all be winners if we just listen to their experts on shows like Fast Money and Mad Money. Just as the audience at a magic show suspends disbelief while the magician saws a body in half, the CNBC viewers suspend disbelief about whether the ‘experts’ on the screen were correct yesterday, or the day before, or the month before. 

To watch CNBC – even volume off – is to be transported to a world where propitious events are on the horizon, where people are busy, serious, and sober. The people are smiling, boarding planes, presenting charts in glass conference rooms, balancing their portfolios and building their nest eggs.

They are me, I am them, we are all watching CNBC together, and we are all in the know.

It’s a nice place to be. And that should be your first clue that it isn’t real. 


About Doug Litowitz


Doug Litowitz is a hedge fund lawyer and a former law professor.  He was Senior Counsel at Magnetar Capital LLC and is active in legal practice.  He advises hedge funds on branding through the Monogram Group. 


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