Friday, August 19, 2011

Yesterday's Selloff & Accompanying Cable Financial Network Commentary

Yesterday's 4.5% decline in the S&P, bringing the month's return down below -12%, brought forth more of the recent and continuing parade of familiar faces of market and economic punditry on the two main free cable financial news channels- Bloomberg & CNBC.

My general impressions were that CNBC seems to be using more guests who are either older and bordering on washed up, or younger and uncredentialed. In no particular order, here's what I recall from the networks' attempts to virtually hold investors' hands during yesterday's market rout.

Over on CNBC, I believe, mid-morning, economist Michelle Meyer, formerly of Lehman, then Barclays, now Merrill Lynch/BofA, solemnly assured viewers that deflation, rather than inflation was ahead for the US economy, on account of falling demand.

I've written some pieces concerning Meyer in the past. Suffice to say, I'm never impressed. Yesterday's performance indicated that she either isn't aware, doesn't understand, or simply ignores the entire Von Mises/Von Hayek/Friedman school which defines inflation as, to quote the last, "always and everywhere a monetary phenomenon." Of the two Keynesian variants of 'inflation,' demand-pull is but one, the other major source being 'cost-push,' widely seen in the 1970s. Meyer's comments were so superficial as to, for me, further discredit her as any sort of trustworthy economist.

Then, again, when have you ever seen a large bank economist of really notable quality? Back when I was with Chase Manhattan, our Corporate Planning & Development group shared the 28th floor of 1 Chase Plaza with the economics department. Dick Zecher was the chief economist when I joined the bank, but he left to run asset manager Chase Investors, being replaced by someone whose name I can't even recall. I think Mickey Levy may have been BofA's chief economist back then. I don't recall who held the post at Citigroup. But every major bank seems to feel it's necessary to spend several million dollars annually to employ a bunch of nameless, also-ran economists. To what end, really?

At noon, David Faber on CNBC had a senior equity manager, probably the CIO, from Gary Kaminsky's old firm, Neuberger Berman, along with Lee Cooperman. It was a study in 1980s equity management- two aged subjective stock-pickers kvetching about how cheap the market has become and how bright the economic prospects really are.

The guy from Neuberger at least had a tight, cogent, if risky story explaining why they were very long in oil. Cooperman, on the other hand, actually began his spiel by confessing that he's been 'wrong so far this year,' but that, hopefully, 'the year isn't over yet.'

Then he went through a sheaf of papers so thick Faber's eyes bulged, reciting all manner of comparative facts to justify his belief that the US economy was about to go on a tear- inflation down, savings up, debt down, interest coverage up, plenty of excess capacity, a weak dollar to sustain exports.

Too bad Lee missed unemployment levels and the recent anemic GDP growth, both in the US and globally, along with- how timely- that day's forecasts from major banks for lower global growth.

Every time I see Cooperman, his famous comb-over looks worse and worse. I'm waiting for the day he just spray paints hair on that head.

Sometime during the day, one of the networks- I'm guessing CNBC- had Donald Trump on a phone interview. Now, Trump admitted a few weeks ago to his first foray into equities. I recall that Intel and perhaps BofA were among his purchases. Yesterday, he was stumping for the major commercial banks, declaring that BofA was really cheap, so he bought a lot of it.

Thankfully, whichever network on which this occurred had an actual equity strategist on later who politely said that Trump, and anyone who listened to him, was making a very serious error. That the large banks were cheap for a reason- especially BofA.

Then there were the battles of competing equity strategists throughout the day on both networks. Barton Biggs was on, I believe, Bloomberg, calling this a great buying opportunity and demanding QE3 and yet another round of federal fiscal stimulus to jump-start the US economy.

I recall thinking, as I listened to this hopeful drivel, how much of an inside game punditry is on these networks. Biggs was essentially calling for ruinous national government policies which would quickly line his equity management pockets. Nothing more, nothing less.

In general, I noted a lack of:

a) credible, marquee name economists weighing in on current and probably future conditions in the US and globally.

b) equity managers with a good performance record this year and this month.

What we see, instead, is too many unproven youngsters who can't recall 1987 or 1998, and too many equity management has-beens. These two networks' guests lists are beginning to resemble the fruits of all those competing late night talk shows whose schedulers dial so many potential guests in hopes of filling their sets with some warm bodies who will prop up ad rates.


TallIndian said...

Chase had some really good economists on the Treasury side back in the day -- Don Fine and Phil Braverman. Both understood the nuances of fixed income markets and this was when the FED didn't announce their monetary policy directly. It had to be inferred from open market operations.

C Neul said...

Perhaps so- the names don't ring a bell with me.

However, your description suggests a very narrowly-focused use, and more for finance than economics, per se.

But such people and functions, if genuinely productive, could have been located on and funded by the Treasuries funding desk, not a cost center.

Same with macroeconomists for loan policies.