Wednesday, July 16, 2008

Irresponsible Investment Advice On CNBC

A few days ago, I saw an unbelievable segment on CNBC concerning investing in financial service company equities.

CNBC on-air personality Dennis Kneale was discussing how badly the valuations of commercial and investment banks have slipped, thanks to their owning untold numbers and types of 'mark to market' securities.

These, Kneale remarked, make the equities of these firms equivalent to 'blind pools.'

That's a pretty harsh comment, but, I think, absolutely true. It certainly would prevent me from owning any of these equities.

My large-cap equity selection process, thankfully, measures and evaluates equities based on factors which basically rule out financial equities at this time.

The amazing part of the CNBC segment was that, following Kneale's comment, a guest bank analyst repeated her assertion that now was the time to look for bargains by bottom fishing the sector.

Her only cautionary remark was something like 'you have to evaluate each one individually, and be careful!'

I suppose in a roomful of professional analysts and investors, her words might be appropriate. But to retail viewers/investors, I think it bordered on, or was, completely irresponsible.

I'm sure you can find, right now, a lot of institutional investors who wrongly believed they could safely hold financial service equities, other than Goldman Sachs, with impunity. And even Goldman has suffered.

How, then, are garden-variety occasional, non-professional investors supposed to decipher and correctly guess at how much 'mark to market' junk is on the balance sheet of each and every financial service firm, and how much more it needs to be discounted?

Simply unbelievable that CNBC actually airs nonsense like this.

I'll have more to write about the financial service mortgage-related mess later this week, as well as my concluding 'from the road' piece about whether we are actually in a broad-based recession.

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