On February 15, The Wall Street Journal reported that for the third six-month period in a row, a portfolio chosen by flinging darts at stock tables outperformed a portfolio chosen by investment professionals. In the face of such tangible evidence of their own irrelevence, the failure of the financial media to disappear entirely can only be a sign of unexpected strength in the market.
The collapse of the stock market has so far not brought about the expected shakeout in the financial news industry. Last month, CNBC chairman Bill Bolster (a man whose name alone makes us turn to him for hope) told the Chicago Tribune that the network's ad sales had increased even as its ratings had died. Nevertheless, the torrent of bleakly pessimistic financial reporting continues unabated, and raises a troubling question: If the democrats can hurl an (admittedly dubious) accusation at President Bush for making "self-fulfilling prophecies" about the economic slump, how much guilt should the financial media be made to shoulder?
One of the crystal ball indicators most frequently used to measure our pain is the measure of waning consumer confidence. But when consumers can't turn on the radio without hearing that the economy is in the shithouse, how can they not lose confidence? More ominously, with a swarm of told-you-so pundits crawling out of the woodwork to convince us the dot-com collapse is God's scourge, it's likely panicky investors think putting all their investments into cash is part of some cleansing ritual. Analysts have ripped into the formerly new economy with the ferocity of someone who bought eToys at $84. In one choice rant, James J. Cramer, the owlish yet manic co-founder of TheStreet.com (and once upon a time an icon of quick dot-com riches) broke the tables of the law on the heads of the luckless new economy losers, saying:
"Stupid people running these companies. Stupid and stubborn and prideful... Makes me sick to my stomach."
In the interest of avoiding further gastro-intestinal discomfort, analysts have not been afraid to acknowledge the possibility that the Great Recession has begun, and acknowledge it often. Dow Jones Interactive, the most comprehensive database of financial and business news, records over 7,800 articles which at least made reference to a recession in America between January 1 and March 1. This is up dramatically from just over 4,000 during the last two months of 2,000, and fewer than 2,500 during the January-March period of one year ago.
But even with so much being written on the subject, it is difficult to find many articles which claim outright that the U.S. is heading for a recession. Overwhelmingly, the format has been to lead with news of some economic indicator taking a turn for the worse and then follow with a barrage of analysts insisting that we are not in a recession. Never before has not being in a recession garnered so much attention. Of course, this is a game that spin doctors and other marketing gurus have played for years; publicly denying something is not very different from publicly acknowledging it. When Alan Greenspan says that we are not in a recession, the very fact that he has acknowledged the issue leads many people to the conclusion that we must be in a recession.
As a nation, we are more plugged into the markets than ever before. In 1990, 25.8 million households invested in mutual funds; by 2000 that number was 50.6 million. To support the rise in investors, the 1990s also saw an unprecedented boom in financial media outlets. Ten years ago, market news hardly warranted a 10-minute brief on CNN, today the goings on of the economy support CNBC, Bloomberg News, CNNfn to name a few. Investing is no longer the stuff of Charlie Sheen types, but something most every Hank Hill has considered. The entire nation hangs on every word from Greenspan, generally considered the most powerful man in the world. In partial acknowledgment of this sea change, the CNBC talking heads fondly point out that "most of these investors have never experienced a bear market" a smug nostrum that reminds us of Alex DeLarge's phrase, "Old Age having a go at Youth."
For the financial media always dependent on meeting demand without supplying an actual product the current situation precisely mirrors the situation a few years ago, when the boom allowed for an infinite number of "Ten Hottest Stocks for Right Now" thumbsuckers. Certain stories still have to be intoned with utmost regularity, maximum throat-clearing and very little variety; but now they're tales of sorrow instead of joy. A regular watcher of CNBC has picked up the following points over the last few weeks: The market won't rebound until Spring, 2002, unless it rebounds sooner or later than that. Tech stocks have bottomed out, unless they haven't. And best of all, you shouldn't believe everything you hear. And for the truly dumb there are ample stories in the general interest media, such as a cover story in Time magazine explaining "How To Survive the Slump." (Hint: If you're getting your financial planning tips from Time, you ain't gonna make it.)
There's certainly a chicken or the egg question here which came first, the possibility of recession or the media frenzy around that possibility. That the most recent round of torture has been set off by poor earnings reports indicates there is plenty of fire for all the smoke. But in acting out a crisis, the most prominent role has gone to the financial media (an unwitting role, certainly, for this industry that so often gets knocked for being obsessed with the bottom line: Betting against America ultimately serves nobody's interest except maybe Osama Bin Laden's). Half of our nation's investors, along with many of our financial media outlets, were born out of the salad days of the dot-conomy. These investors many of whom have never experienced a bear market turn to outlets like CNBC and TheStreet.com for advice. And increasingly, all they're getting are campfire tales about psychopaths stalking Lovers Lane.
Financial analysts have prognosticated on the markets for years, but never before have so many staked so much in those prognostications. If the current buzz is that the market is on its way down, expect investors' actions to drive the market right into the ground. Would we be headed for economic decline regardless of what spin the financial media put on? Quite possibly. But with every media outlet sounding the recession horn, it's hard to imagine heading anywhere else.
courtesy of Alice the Camel
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