We recently quoted Thomas Gilovich writing about financial reportage in the context of the innate human desire to be entertained:
‘The possibility of inaccuracy obviously increases enormously when the worth of the message is measured by how well it entertains rather than how well it informs.’
The ‘ne plus ultra’ in investment commentary surely comprises all of the Reithian principles – inform, educate, entertain – and no two of these aspirations need be mutually exclusive. An extra dimension to this debate comes from tackling semi-solicited financial advice, its value – if any – and the form which it takes. One of the more notorious stock tipsters and self-appointed but network-endorsed financial gurus is Jim Cramer, founder of financial website TheStreet.com and president of hedge fund Cramer Berkowitz. If you thought Pimco’s Bill Gross juggled a number of balls in issuing monthly market-moving commentary while managing a multi-billion dollar bond fund, Gross has nothing on Cramer, whose ubiquitous presence in financial media is evidently no barrier to issuing stock tips the way a busted fire hydrant issues water. Jon Friedman for MarketWatch recently described Cramer as follows:
‘..he presents a very shrill voice of experience, and his stomping, preening, yelling and buzzer-pounding schtick threatens to make a mockery of investing. Among the show’s 16 available buzzers are ‘TRAINWRECK!’ and ‘HALLELUJAH!’ and ‘KA-CHING!’
Each to his own. Given the exhausting breadth of the Cramer tipping universe, ‘Jack of all trades..’ might be an even more appropriate coinage. But if anyone comes close to defining investment commentary as entertainment, or perhaps investment commentary as infantilized noise-making, it is probably Cramer. CXO Advisory Group has a go at pinning Cramer down for the value-added of his investment track record. Their conclusions:
‘Mr. Cramer is right about 50% (25 out of 51) of the time with his stock market predictions, prone more to headline hyperbole than equivocation.
‘His predictions sometimes swing dramatically from optimistic to pessimistic, and back again, over short periods. It is difficult to infer his guiding valuation theory, if he has one. We wonder whether he tends to be swayed by the arguments of forceful advocates with whom he most recently interacted.
‘..In summary, Mr Cramer’s stock market calls since May 2000 have low consistency and approximately coin-flip accuracy. He seems more an entertaining (to some) stream of uncalibrated opinion than a stock market maven.’
The value argument in all this is easy to address: those who complain at the quality of (free) financial advice should remember that they get what they pay for. Bloomberg columnist Michael Lewis in October 1997 also addressed the issue of assessing investment track records which has been made substantially easier with new technology; on Bloomberg, the WHO function allows easy cross-referencing to news relating to market celebrities:
‘..I wondered whether the Bloomberg technology was not the beginning of the end for stock market gurus. The market prophet has always depended on people not quite recalling that prediction he made 18 months ago. Even if a handful of cognoscenti knew that you were blowing smoke, there were still millions of less well-informed investors who you could appeal to with your latest apercus.
‘In the old days, the only way a guru got fried alive was if he became so famous that everyone remembered what he’d said last year. In calling the Crash of 1987, Elaine Garzarelli put herself in this sad category. And a mere few years after she was regarded as a stock market genius, she was the subject of perhaps the most humiliating WHO headline:
Elaine Garzarelli Denies She’s a Contrary Indicator
‘Now, thanks to technology, we can see ahead to a day where we all will have, at the press of a button, every last prediction made by every pygmy in the stock market.. No one who opens his mouth in public is safe.’
For every investor who can’t afford a Bloomberg terminal, there is always Google. And for every adult investor who finds Jim Cramer’s clownish antics a little difficult to tolerate, there is always a coin toss. And on the subject of equivocation, our thanks to the correspondent who pointed out that on Monday, Bear Stearns published a Sell note on ITV at the same time as Deutsche Bank published a 64-page Buy note. ITV benefited mid-week from having its analog licence fees slashed by Ofcom, so 15:Love to Deutsche Bank, but that doesn’t change the quality of ITV’s entertainment (we would argue: dreadful) or the quality of its informational / educational offering (we would argue: borderline non-existent) or the value of its advertising-driven business model in a brave new multi-channel digital age.
* Markets are admittedly quieter during the summer months, but there are surely few excuses for the hybrid personal press release and curriculum vitae which escaped from the Appointments section and made it to the top of yesterday’s ‘Companies and Markets’ section of the FT instead: ‘Yates quits top job at Merrill’ – with sub-heads
* British M&A chief changes mind about working in US
* Prefers to stay involved in client relations..
and its attendant details about Mr. Yates’ private thoughts, his recent deal successes and his recent roles at Merrill Lynch (‘head of investment banking, head of European M&A, head of Europe, Middle East and Africa investment banking, and co-head of global M&A’). Evidently Mr. Yates was not global head of Euro T-Bills.
We can, however, breathlessly report the following scoop:
‘Ansbacher strategist not to quit..
* Investment strategist changes mind about having sushi for lunch
* Prefers to walk back to Southwark tube after work during this hot spell
* 11 O-Levels; 4 A-Levels; Favourite colour: baby blue..’
Tim PricSenior Investment StrategisAnsbacher & Co Ltd