Steer Clear of CNBC’s Scatological Investment Advice

Wall Street's version of this...

Wall Street’s version of this…

...is this

…is this CNBC program

At the nexus of entertainment, big-money television, and the average person’s desire to have more money, there was born a 24/7 buisness news cable channel called CNBC.  Although there is the occasional interesting interview with a captain of industry, financial fat cat, or respected economist, the vast majority of what this blow-show propagates is not fit for consumption.

Take, for one example, “Fast Money”, a daily program featuring a panel of “expert” Wall Street “traders” talking about the day’s news and their on-the-spot clever trade ideas.  Even the name stinks.  Either it invites viewers to indulge in their baser desires to make a quick buck without working too hard or it seeks to sensationalize and theatricalize the archetypal Wall Street culture of fast-thinking and fast-talking money makers.

 Stock Picking Entertainment for the Common Man

The program features polished, high-production-value graphics and rapid-fire pithy repartee between five or six regular and one or two guest panelists who all speak with consummate confidence and swagger using a deluge of slick financial yak.  Not unlike professional wrestlers, they each have a ridiculous nick-name like “The Liquidator” or “The Pit Boss”- whether to be funny or cool or tough, it’s not clear. The bobblehead experts blather on about how to “play” (that is, trade in light of) this or that company’s earnings or other “catalyst”, what direction gold or oil are headed in and at what price one should buy or sell a hot-topic stock.  There isn’t much analysis involved.  There is little thoughtful discussion of investment pro’s and con’s or risk. No mention of any financial number from anything other than an income statement.  And you won’t hear Benjamin Graham quoted on this program. This gig is mere investor-tainment.  Like WWE professional wrestling billed as “sports entertainment”, but at least those BS artists admit it’s “entertainment” right up front.  Or is it financial porn? All form and no substance.  A glitzy show designed to increase your heart rate with the quick-witted banter and sham arguments interspersed with lottery-ticket stock advice.

The show is so patently ridiculous, the question becomes who is the target audience?  And what person who cares about their time and money could endure 30 minutes daily of this verbal diarrhea, let alone take any of the advice proffered?  According to the show’s own sales pitch:

“Faster than a New York minute Fast Money traders give you the information normally reserved for the Wall Street trading floor, enabling you to make decisions that can make you money” [emphasis added].

So there it is.  The show is clearly not for those already on the investment bank’s trading floor.  Professional analysts and asset managers obviously don’t dial up CNBC for daily trade ideas so they can make money.  So who’s left?  The average, under-informed or novice investor or the day-trading junkie who quit his real job thinking he could trade his way to millions.  For these folks, Fast Money is offering some kind of fake inside look at how the big boys on Wall Street talk shop.  Problem is, it just ain’t so.

Talking Fast Doesn’t Make You Smart (or a Good Investor)

It’s a well-studied phenomenon that people who speak faster are perceived as being more intelligent.  TV producers know this and beginning in the early 2000’s television shows began making dialogue faster, removing the dead air space in conversation.  This not only allowed more word content, it made viewers think the characters were smart.  Fast Money exploits this glitch in human psychology to make people think the panelists are smart-money pros and you oughta tune in daily if you wanna talk and walk and make money like they do.

The Fast Money crackerjacks appear smart, but what’s their background?  Have they made a pile of money taking their own advice? Or charging other people 2 and 20 for their expertise?  It’s hard to say but take a closer look at Tim “The Ambassador” Seymour, one of the regular poseurs appearing on the daily spectacle of concern here.  The glowing bio on CNBC portrays the man as an emerging markets hedge fund ace whose investment approach has been shaped by “spending significant time abroad”.  But digging a little deeper and reading between the lines, it doesn’t appear Messr. Seymour is much of a big league player.

After spending a few years with UBS in New York at the beginning of his career, he somehow found his way to a Russian Investment bank called Troika Dialog.  While that may sound like a trade down in terms of brand name, perhaps it was his “big picture” thinking that led the venerable Russian bank to court the man to be head of fixed-income (and later head of sales for all products) in Moscow in 1998.  It’s hard to imagine a whole lot of fixed income (or any other) business other than wound-licking going on in Moscow in 1998.  In August of that year, the Russian financial crisis hit, the ruble was devalued and the central bank defaulted on its debt.

But anyway, after a whopping two years (which apparently qualifies as “significant time abroad”) Seymour returned to New York to open a Troika Dialog US broker dealer in 2000.  By 2005, he and a couple colleagues started Red Star Asset Management, a Russian and Eastern European focused hedge fund.  Kudos to Mr. Seymour for starting a fund which reportedly grew to as much as $150 million in assets.  That’s not necessarily an easy task, but let’s not forget that just about anyone can call themselves a hedge fund pro and raise capital, especially from about 2002 to 2007.  There’s dozens of examples ranging from outright fraudsters to striving wannabe’s. Remember Bayou Hedge Fund Group?

Unfortunately for Seymour, the salad days were short lived.  After two years, he left Red Star in 2007 for reasons unknown. By 2009 the fund had gone from $150 million to just $12 million in the wake of massive redemptions following a collapse in Russian and Eastern European share prices.  When the fund’s largest backer, Erste bank of Austria which represented a whopping 40% of the AUM pulled its mandate, the gig was over.

Seymour’s next move was to set up his own “shop”.  He started two funds in 2008 under the Triogem Asset Management moniker.  Those two funds were closed in 2013 after one of the founding partners quit and Triogem “now focuses on advisory and wealth management strategies”.  This suggests he probably wasn’t the intellectual firepower behind the funds.  Hardly the stuff of investment legend.  But even if Mr. Seymour, when he wasn’t touring Russian vodka distilleries, managed to make a killing during his strangely itinerant career, does that make him a trusted resource for what to do with your hard earned money? 

Don’t Take Investment Advice from your Television
Fast Money's Najarian: Would you buy a stock from this man- or a used car?

Fast Money’s “Dr. Evil” Najarian: Would you buy a stock from this man- or a used car?

Pretty-faced, fast talking TV pundits are not necessarily investment experts that wealthy people (let alone novice investors) should be entrusting their money to- or taking advice from.  Although plenty of old ladies would buy a stock if Pat Sajak pimped it, that doesn’t make it right.

Marrying investment advice with TV personality is not a good idea.  It’s not like being a celelbrity chef, where you can walk people through your process and deliver some useful tips for cooking at home.  If you’re going to watch the likes of Jim Cramer or Fast Money- it’s just the opposite; don’t try this at home unless you just love the thrill of chasing the latest momentum hot-topic stock and don’t care about trading commissions, taxes, and long term returns.  As an investment strategy, trying to market time entry and exit on individual stocks simply doesn’t work in a prolonged and reliably repeatable way.  And it doesn’t even work for asset classes (i.e. trying to time when to be in stocks vs. bonds, also known as tactical asset allocation), as discussed in this excellent article.

So here’s Seymour in an April 2013 Fast Money bit called “Beginners Guide to Investing” talking a hundred miles a minute and touting a random basket of stocks that a beginner investor ought to own as his first portfolio. Making and taking this kind of investment advice through a TV set is simply ludicrous. And it’s not just Seymour- the remaining cast of characters are just as guilty.

Of course, Fast Money runs a fine print disclaimer at fast forward speed at the end of the show (found here on their website), that basically says “Don’t take any of this as real advice- it’s just opinion- and don’t blame us if you lose your shirt doing anything that our blowhard experts prattle about”. So despite how they market the show and all the authoritative bluster, they sneak in the disclaimer so they can’t be held legally responsible for all the rubbish advice. The Fast Money troop ought to wear that disclaimer on their shirts like a surgeon general’s warning.

Bud Fox News suggests turning off CNBC and cracking a book.  Anything written by our fantasy league Slow Money experts is worthy prose to ruminate on:  John Bogle, Charles Ellis, William Sharpe, Robert Shiller, Warren Buffett, Daniel Kahneman, and Benjamin Graham.

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