THE BLOG
01/14/2015 06:05 pm ET Updated Mar 16, 2015

CNBC, The Lame Duck Network: Shilling For Short Sellers and Hating Obama Are Not Enough Anymore

Daytime ratings for the financial news network CNBC have been in free fall since the summer, when they hit a rock-bottom 21-year low. The CNBC response, of course, has been to shoot the messenger by leaving Nielsen as its rating agency! In fairness, CNBC has a point: Nielsen only logs at-home viewership and the financial news networks all have considerable out-of-home audiences, in gyms, offices and trading floors for sure. CNBC will design its own ratings system using the market research firm Cogent to include its mobile viewers, while its competitor, Fox Business, sticks with Nielsen, and Bloomberg continues to sidestep the ratings game. But is there something more behind the change in CNBC's fortunes besides not counting the office and gym audiences? After all, the same audiences also watch Fox and Bloomberg as well.

Just a couple years ago, the beginnings of CNBC's ratings fall was attributed by some commentators to the allegedly more "liberal" or at least "market promotional" bias of the network. This despite its history of championing the views of its Chicago commentator Rick Santelli, who was the godfather of the Tea Party and actually coined that phrase during an on-air rant against the then-new Obama Administration's initiatives to help homeowners with underwater mortgages.

Santelli now enjoys a privileged position in CNBC's morning programming, including his own "Santelli Exchange" segment that features animated, if somewhat repetitive and predictable, rants against Obama, ObamaCare, federal spending, "quantitative easing," Central Bankers in general and the U.S. Federal Reserve in particular, as well as its Chair Janet Yellen and European Central Bank President Mario Draghi. This steady stream of daily invective against Obama and the Fed is amplified by "interviews" Santelli conducts with various market participants and commentators who share (not to say "parrot") Rick's views. Typically these "interviews" represent the views of some Chicago-based option, futures and bond traders who hate Obama ideologically and have similar sentiments about the Fed, which has taken a lot of juice out of their trading activity by maintaining interest rates next to zero to help the broader (i.e., non-trading) economy recover from the near-depression of 2007 to 2009.

Santelli's daily stream of invective-laced advice has not generally been beneficial for CNBC's viewers who may have taken it. Santelli, for example, consistently argued, over several years, that the Fed's easy money policies regarding interest rates and quantitative easing would have by now produced rampant inflation and a crash in the value of the U.S. dollar, and advised investors accordingly. But in his usual manner he simply screamed and interrupted when CNBC's only true expert on Fed policy, Steve Leisman, called him out in a live discussion. While Rick apparently simply denied he had made such forecasts, it is clearly on the record that he did (hat-tip to Business Insider).

But Rick Santelli is not the only reason certain viewers may be turning off CNBC, at least those at home (i.e., the retail investor). Just last Friday, prominent Fast Money CNBC regular Guy Adami flatly declared that the U.S. "economy is lousy" despite the most recently reported 5 percent quarterly GDP growth rate, in order to support his generally anti-Obama and anti-Fed views. Expression of such views is now obviously encouraged on CNBC as led by its key executive editor Patti Domm, who regularly posts blogs such as the one posted early on Friday, January 9 predicting material downturns in the market on the basis of ideological views, generally in line with the Tea Party and short-oriented hedge fund traders' views of the economic policies of Obama and the Fed. Beyond Ms. Domm, other CNBC staff writers who regularly post pieces suggesting imminent "corrections" or even crashes in the market include Jeff Cox, whose views seem to coincide with short-selling hedge funds as in his disparagement of the 321,000 November job creation report, which no doubt surprised some short-the-market hedge funds.

CNBC has been tracking Tea Party positions on issues like ObamaCare since 2009. This is perhaps understandable given Santelli's paternity, but even more, he has been correlating the balance of its market commentary to promote the views of some short hedge funds that bet against the market in 2014 (and were wrong) and who seem poised to double down on that negative view entering 2015, according to the Wall Street Journal. Not to be outdone, CNBC's Jeff Cox jumped in a few hours after the Journal to propose that the recent dramatic fall in oil prices would necessarily lead to poor corporate profits in the coming earnings season. This view, of course, is certainly within the pale of possible outcomes -- that's what makes markets. But the fact is that you won't find a contrary view on CNBC, just the negative, which tends of course to send retail investors to the "sell" button, just as when the same Jeff Cox made a similar downbeat prediction just before the 2014 earnings season started in mid-April. It turned out to be a pretty good year for investors who did not sell off stocks despite his advice and for the short hedge funds who profited on the stock market's way down, and then could buy them up cheap before the stellar earnings reported during the rest of 2014

In short, CNBC should be asking itself why on earth it continues to show such favoritism for the views of market pessimists and short sellers -- indeed, even facilitating such traders profit strategies -- at the expense of their retail TV audience. Maybe the hedge fund titans take the CNBC folks to some fancy lunches, or maybe they're mostly just like Rick Santelli, who are heavily invested in their Tea Party political views and determined to impose them on its coverage patterns. But at the end of the day, why should anyone watch CNBC for actual market "news" on finance and the economy when the network seems determined to turn off its audience with programming that just mimics the Fox News style and at best, helps only the short hedge fund crowd by scaring off retail investors just when the hedges want them to be scared? If viewers want pure unadulterated negativity, they can get that on the Fox channel.

By Terry Connelly, Dean Emeritus, Ageno School of Business, Golden Gate University

Terry Connelly is an economic expert and dean emeritus of the Ageno School of Business at Golden Gate University in San Francisco. Terry holds a law degree from NYU School of Law and his professional history includes positions with Ernst & Young Australia, the Queensland University of Technology Graduate School of Business, New York law firm Cravath, Swaine & Moore, global chief of staff at Salomon Brothers investment banking firm and global head of investment banking at Cowen & Company. In conjunction with Golden Gate University President Dan Angel, Terry co-authored Riptide: The New Normal In Higher Education.