The Charade Continues at CNBC

Nothing has changed at CNBC.

An unrepentant Jim Cramer still spews nonsense masking as financial information of use to investors. The good news is that his pitiful interview with Jon Stewart, and his clownish antics, have made him less of a threat to investors.

Far more insidious are the well-dressed, well-educated and well-spoken "experts" who fill up CNBC's time slots and seek to enlighten us with their wisdom.

Last week, Steve Auth of Federated Investors was interviewed. Mr. Auth believes the market is "oversold." Among his recommendations is that investors should focus on stocks that offer dividends "against strong balance sheets."

Should you listen to Mr. Auth?

He certainly has impressive credentials. He is a graduate of Princeton with an M.B.A. from Harvard. He is the Chief Investment Officer for global equity and asset allocation products, and Senior Portfolio Manager for Federated Investors, Inc., which describes itself as providing "world class investment management." Federated has $407 billion of assets under management.

Surely, Mr. Auth can tell us how to invest.

Since Mr. Auth has special expertise in "asset allocation products", I reviewed the performance of Federated's Balanced Allocation Fund (BAFAX). This fund invests in four underlying Federated funds that invest primarily in U.S. and foreign equity and/or fixed income securities, making its selection reasonably representative of the investment management skill of Federated.

The results were not confidence-building.

According to Yahoo Finance, this fund has underperformed its benchmark index (the DJ Moderate Portfolio TR USD ) for the past 1- and 3-year periods. Over the past three years, it is ranked 591 out of 963 funds in its category.

Morningstar delivers the cruelest blow. It ranks the fund "below average."

Not exactly "world class investment management."

In his excellent book, The Big Investment Lie, Michael Edesess, a Ph.D mathematician, provides the following checklist of sales practices used by brokers and advisors to separate investors from their money:

• Throw numbers around
• Look respectable and earnest and sound sincere
• Use technical jargon
• Say they can help you get rich
• Deal with objections through evasion
• Appear to be very well informed
• Have something new to offer
• Use impenetrable language
• Talk about "sophisticated technology"

Keep this list in mind the next time a broker or advisor pitches your business.

CNBC gives these self-styled experts a forum to reach millions of investors.

It's all a charade.

Don't fall for it.

The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein.

Comments

[Rule Of Law]

Keep hammering away at this, Dan. I'm becoming a fan!

[GTRich2004]

The thing that kills me about the fund managers on TV is that they get applauded as long as they lose less than their industries average. So when the transportations sector drops 50%, they are treated like Gods for only losing 40%. Here's a thought, how about not losing anything?

[hoopesaz]

Say his fund had performed in the top 10 out of 960 funds...th­at wouldn't qualify his comments as insitefull any more than his current fund performance disqualifies him. Investing in the stock market is very much like gambling. If your good at it you can reduce the risk, but it's always a bit of a gamble.

The author (and everyone else looking to dump on anyone who works, lives, talks about, or even has a passing interest in Wall Street) need to move on to something productive.

[bdaved]

Wall Street and productive in the same sentence. How 'bout that?

[dugum]

Madoff must of been part of that charade. Steve Auth has the credentials. But these guys with their titles and laurels are still just guys. They are all emperors wearing new clothes.

[DuganS1]

Jim Cramer was head of the hedge fund with the highest rate of return over the 15 year period of its existence. Investors saw 25+% annual returns after taxes and fees. It might not be a bad idea to listen to someone with those credentials. What is Solin's record by the way?

[marlovian]

Thanks, Jim.

[WinterParkMom]

Anyone who takes financial advice from tv shows without due dilligence and investigations deserves to lose whatever they invest whenever they follow that advice.

It's ignorant.

[marignymitch]

CNBC: Separating fools, money since 1980.

[mrspiffy]

Buy low. Sell high. Always worked for Bernard Baruch.

[Woggles]

Don't worry too much. People with money, who make money in the market don't listen to cable financial channels. There's no tradeable information there. And those without the money aren't investing much anymore,
That's why these shows are in such a panic.

[GnomeDigest]

This whole CNBC thing has been so overhyped. Their viewership is tiny and their impact at best would be negligible. But hey, why not throw overhyped hissyfit trantrums over a tv station doing what ALL TV STATIONS DO: Keep your attention while they try to sell you stuff.

They are not there to provide a public service. They are not there to inform you. They are not there to entertain you. They are not there to help you.

All TV aims to do is keep your attention while they try to sell you stuff. To suddenly freak out now because you deluded yourself into believing otherwise is moronic.

[SaltySaltillo]

I don't think you can write off Cramer as harmless just because Stewart ripped him one. Just yesterday I heard him say something very disturbing, very false, and very political when being interviewed by Matt Lauer on NBC morning programming. The question was why did markets tank on the same day Obama talked about the auto makers. Cramer's explanation was that there are a lot of investors and fund managers who are GM bondholders who were spooked by "what Obama might take away from them". Of everyone hearing such a statement, how many actually understand that Obama is not threatening to take anything away from any corporate bondholders - the bankrupcty courts (if that is where the insolvent GM ends up) have the power to restructure GM's debts. It is not in Obama's hands. But Cramer would like for the dumber half of America to think that if anyone loses anything because of the GM insolvency, Obama can be blamed. This is Fox-Soviet-level propaganda, but Cramer gets away with it because he is supposedly an expert on "arcane" and "technical" stuff that people are told they shouldn't try to understand because it is too complicated (another useful lie told to gain a margin of control over financial discourse)

[mjjj]

MR. cramer was also in the blind regarding the affect credit default swaps and other derivatives would have on the market thats into the market actually started going down dramatically----- the jest of it is its not just cramer getting things wrong its just about everybody that just needs to stay even with the overall market to get vastly over paid------­regardsMJJ

[mjjj]

the point you make about cnbc is well taken--------that being said a large majority of investors that read blogs dealing with the market would rather criticize and belittle others than actually learn how to make money-----­--personal i was posting thoughts regarding the market on cramers blog i think my long term record would show i was pretty good-----A few guys thanked me now and then but for the most part guys were just chastising cramer for every little thing----personally i think cnbc is at fault for playing up the fact cramer was successful running a hedge fund in the nineties--­--------be­tween 1993 and 2000 the s%p index was up over 200% guys like jim cramer and bill miller could not help but make money------I will not go into MR cramer's stock picking prowess but will point out his basic knowledge of variables that move markets other than actual news directly related to stocks is very poor----when oil was going over 100$ a barrel he claimed it was do to demand ?----said variables in the currency market had little to do with it-----just recently he was talking about what A good idea it was to go long china FXI was 30 at the time----- sure china will spend some money inside china but what about the export side of things -----the problems japan is having also is a factor the yen is a de facto currency of sorts for china-----

[NoToGOP08]

I hope you come back and write regularly about each of the so called "experts".

[RRG64]

Yes, daily.

[luke150]

Very well said. Enough with the "best and brightest" that worked on Wall St. My experience shows that at least 90% of the investment industry are totally clueless what they are talking about. If you define everything as "long-term", then you can argue anything. Even if we assume the marked is "oversold", why should I go into dividend plays? Because these are the big companies that the big funds are invested in, no other reason.
There are a handful of really great money managers that make money on a consistent basis. Most of them are hedge fund managers and they made billions last year. These are the people that know what they are doing. By definition, these people don't look for publicity and very rarely appear on TV. They don't need sales and marketing, their results are good enough magnet for clients.