Re-Booting Financial Journalism
In this election season, it’s pretty clear that the quality of political reporting has been called into question by both the electorate and even the president of the United States.
Yet since economics, especially income disparities between classes and lack of wage growth and retirement security have also become central issues among Democrats, it is also time to critique the quality of financial journalism and its failure to educate investors about the financial industry and economic policy.
This is a broad claim about the deficiencies in financial journalism, but it has a solid basis, especially when the pro-corporate journalism bias is on display daily. In a few cases, this bias is propelled by some on-air TV commentators whose bias is not only evident, but touted as a sign of their market and economic knowledge.
In reality, this supposed knowledge is a diversion used to disguise a broader, historical knowledge of economics. It is also a way to assure guests from corporate America and financial analysts that they are on safe ground when it comes to receiving tough, provocative questions about the failure of corporate economic policies and errant investment practices.
In some cases, the deficiencies in financial journalism today are very visible, especially when it comes to keeping less-informed individual investors interested in market news and investing. Anyone who has spent hours watching the major financial shows on FOX, CNBC and Bloomberg has seen the constant mantra that any market pullback is a signal to buy. That may be true for institutional investors, but for the average investor whose money is either being spent on essential expenses or is automatically invested in a 401(k), the idea that have thousands of dollars on the sidelines for a quick investment is naïve and cynical.
Even worse, many of these investing suggestions are made by people who have no accountability and uncertain reputations as financial journalists. Take the case of CNBC’s Jim Cramer, the short-seller
and dedicated pro-corporate commentator. Cramer’s naked short-selling story has been told many times before and it should be required reading for anyone interested in the quality of financial journalism today, as well as any investor who wants to take his recommendations seriously. (You can see some of the better stories on Cramer’s short-selling history here.)
But what should be of greater concern than Cramer’s trading activities, and one that should have attracted the attention of the SEC, is why CNBC’s management put him on the air in the first place. Aside from his frat-boy flamboyance and gift-of-gab that appeals to day traders in their 20s and 30s, CNBC management should air his trading recommendation on a quarterly basis and post his net gains for the quarter. But that assumes CNBC has an ethical responsibility to their investor audience. It’s pretty evident they do not.
But others have done the work of CNBC management. One study examined Cramer’s buy and sell recommendations for the period July 28, 2005 to Dec. 31, 2008 and found that they were not much better than the S&P, but this study excluded trading commissions. Their conclusion of Cramer: “In other words, there’s no evidence of any stock-picking skills — his picks are neither good nor bad. In other words, it’s just entertainment.”
And not to show that Cramer’s TV career as a financial TV entertainer is a one-off event, CNBC is busy grooming Mark Cuban, another flamboyant, loud rich guy, as a new “investment expert.” That’s a stretch since Cuban made his money in the 2000 tech boom and has not repeated that lucky stretch since. Based on the track records of Cramer and Cuban, CNBC is re-defining and confusing the concept of investment knowledge with being lucky or skirting the law and then passing these people off to the public as “investment experts.” Of course they are not experts, but they are entertainers who will only make people seeking serious financial information more cynical about the economic system.
The Pro-Corporate Bias in Action
Of course, Cramer is not alone in his pro-corporate, ultra-free market positions. Other major on-air, pro-corporate, free-market, often Libertarian TV reporters include Maria Bartiromo, Stephanie Ruhle, Larry Kudlow, Stewart Varney, Neil Cavutto, Joe Kernen, Steve Liesman, and Rick Santelli. There are many instances when these reporters have elevated their free-market ideology above the facts. For instance, Larry Kudlow said there were no victims from the global LIBOR price fixing scandal, despite the fact that there are trillion in loans linked to LIBOR. Kudlow, an economic advisor to Donald Trump, certainly knew better, but protecting the big banks that drove the price fixing was more important than the facts.
There are other examples of the pro-corporate prejudices these people show on a regular basis. Take the case of Bloomberg’s Stephanie Ruhle, who said “America is not ready for a socialist president” when referring to Democratic presidential contender Senator Bernie Sanders (D-Vt.) After she made the statement, she said something to the effect “Yes, I just said that,” as if to emphasize her point, state some universal truth or to say on-air that that is what she and others in her network think about a socialist candidate for president.
While her comments could have been considered a throwaway line, it was not. The idea that American is not ready for a socialist candidate is widely said in the media, but it also ignores the fact the Sanders is tremendously popular because of his long-held beliefs about policies and politics that favor equal economic social and legal justice. His comment that Wall Street is based on fraud reached a huge segment of the investing public. If he had said “Wall Street is based on conflicts-of-interest,” he would have even been more correct.
End of Keynesian Economics
Before the Republicans said they would not co-operate with President Obama on any legislation, financial reporters used to talk about fiscal and economic policies. The economic policies where set by the Federal Reserve, and Congress worked on a legislative agenda. For the past seven years, there has not been any fiscal policy. As a result, the financial media became obsessed with Fed policies and rarely reported on the Republican obstructionism that has helped delay any economic recovery from the 2007 recession.
It seems that having a short memory about economic events is a new requirement for being hired as a financial reporter. It would help if more financial journalists knew that a colleague of John Maynard Keynes, who most non-ideological economic and financial reporters would acknowledge as being a major figure of the dismal science in the 20th century, was the respected Marxist economist Joan Robinson (1903-1983).
Today, there are few socialist and Marxist economists mainly because it is not an economic philosophy even being taught in the major business schools. One reason may be that corporate America would not hire an economist with a different perspective, so there is no need to teach non-pro-corporate economic theory.
And as a result of stagnant wage growth and diminished upward mobility, we have more angry young people who realize the current economic system is not working for them. And when this happens, TV programmers have a solution: They give us more shows about entrepreneurs who are making cupcakes, becoming pawn shop customers, entering cooking competitions, or people who must sell a business idea to shark-tank investors.
So if polls show the electorate is dissatisfied with the slanted reporting in this 2016 presidential race, the financial media should also be concerned that their prejudiced reporting has helped fuel today’s tense, unstable political environment. They should also be aware that the young voters who have little trust in today’s financial system will not be getting their advice from blatantly pro-corporate financial networks.
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