Todd Stein & Steven McIntyre
CNBC is not in the news business; rather, they are all about high ratings. Their highest rated show these days is none other than Mad Money, which is basically one hour of Jim Cramer screaming at viewers to buy this and sell that. Mad Money reminds us of those 3am sports betting forecast shows where so-called experts give you their predictions on the week's games. Hearing Jim Cramer scream "Buy Google" isn't much different than Matthew McConaughey's character in Two for the Money telling clients to take the Lions over the Packers.
Cramer is just one of many cogs in the mainstream media's hype machine. The others include cover stories in Barron's, puff pieces in BusinessWeek and television interviews with so-called market "experts" who happen to be bullish 99% of the time. Add to that an establishment of cheerleading government bureaucrats at Treasury, Labor and the Fed, and we can see why most Americans have no idea that our financial system faces turbulent times ahead. Smart people such as Warren Buffett, Paul Volcker and Sir John Templeton have all warned of the systemic risk that exists today, but CNBC and the rest of the press chooses to drown out such warnings by presenting these opinions in the context of a bull/bear debate. And in these days of fair and balanced reporting, anytime a bearish view is presented, CNBC has to trot out the resident bullish hacks such as Larry Kudlow or John Rutledge to tell us to buy stocks.
CNBC is owned by General Electric, a company that seeks to make profits for its shareholders. CNBC will do whatever they can to keep their ratings up, which means their coverage will coincide with the universe of momentum investors. Viewers want to hear stories about a "hot stock" or "hot sector", not about the wisdom of buying distressed assets or keeping money on the sidelines. When the market happens to be down across all sectors, CNBC and Wall Street cooperate in promoting a specific industry by informing the world of various upgrades. When tech runs, the hype machine trots out biotech. When biotech starts to get choppy, the machine trots out financials. And on and on it goes. If a bear market stays around for a while and none of these stories get any traction, the ratings start to fall. This is what happened in 2001 and 2002. We can remember the jealousy expressed by the Wall Street media when stocks were losing their luster and real estate became a national infatuation.
As we assess the world in early 2006, it looks like real estate is cooling off and stocks are trying to make new highs. The giddiness is back among the Wall Street media. Analyst upgrades are headline news again. M&A activity is starting to remind us of 1999 and 2000. The one thing that is different this time is that Wall Street has embraced commodities whereas, in 2000, commodities were dead. Jim Cramer has been a huge bull on various energy stocks over the last two years. He has even been an occasional proponent of owning a few gold and silver stocks, something that has been taboo on Wall Street for a generation.
The rest of the media establishment, however, seems to have retained its bias against gold and silver. Just take a look at the various major investment banks' price targets for gold & silver all near or below the current price. Compare this to escalating price targets for crude oil, copper and non-precious metal commodity stocks, and the discrimination is apparent. This shouldn't surprise anyone as gold and silver are the enemies of paper assets. Gold and silver is real money, and neither the government nor Wall Street can profit from manufacturing or distributing it, which is why the bias exists in the first place.
Eventually the hype machine will be forced to reckon with gold and silver. It took almost a decade for the financial establishment to buy into the Internet, but when they did, anything associated with it took off. When Howe Street in Vancouver becomes a choice destination for MBAs and financial conferences, you know things will have changed. Eventually the mainstream will wake up to gold and silver, but by then, it may be time to sell.
April 5, 2006