09/20/2012 04:59 pm ET Updated Nov 20, 2012

The "East Coast" Bias of Media Financial Pessimism

Anyone obsessively following the commentary of financial news on cable news networks or the Wall Street Journal - all based in New York City - would be struck by the almost unrelenting pessimism that characterizes their editorializing and "straight" reporting, on the actions of the Federal Reserve and the European Central Bank's response to incipient recession, the continuing crisis of sovereign debt levels in Europe, and persisting unemployment/slow growth in the U.S. Indeed, "CNBC" might as well stand for "Continuous Negatively Biased Commentary."

Just listen to the program hosts and their selected guests hour after hour: the Fed's QE 3 is futile, won't work, can't work, will surely backfire, will undoubtedly cause rampant inflation, is wrongheaded, delusional, incompetent, or worse. And the same for the ECB - phony, insufficient, kicking the can down the road, politically motivated, insufficient, incomplete, dishonest, and futile.

Underlying these views are a persistently negative view of broader economic prospects. For the third consecutive time this year, they have featured analyst after analyst confidently predicting that the coming quarters' corporate earnings will be down at least 1% in aggregate - a prediction that was wrong in both the first and second quarter (a fact they conveniently forget to mention).

There are of course always differing opinions about the prospects for financial markets - that's what makes markets. But there is no longer any real evidence that the main financial networks - especially CNBC and Fox Business and to a lesser extent Bloomberg - are at all concerned to present a 'fair and balanced' view.

After the Fed's announcement last week detailing its new program of mortgage bond purchases and extension of low rates through mid-2015, almost every commentator CNBC put on air expressed a negative view of the Fed's decision. Even those who noted that the stock market would have a bounce bemoaned the fact. The sole CNBC analyst who tries to maintain a balanced perspective, Steve Leisman, was repeatedly squelched by the program moderators and his fellow commentators. One regular panelist early on said the mere 10 point advance in the Dow in the first few minutes after the Fed's statement proved the Fed's actions were already a failure - CNBC did not have that fellow back on at the days close, up 200.

Could all this be just hidden political bias? That's almost a moot question, since most of the CNBC hosts (as well as the Wall Street Journal) have already made clear their political preferences for anyone but Obama. That's fair, because it's so obviously disclosed. And it certainly seems tuned to their main audience. Small wonder that so many on CNBC seem to be auditioning for slots on Fox News (not the Fox Business channel, which is a ratings loser).

But it does seem odd for the same commentators to be so negatively biased in terms of the interests in their audience in a dispassionate view of the financial markets' performance and prospects. If there is really no hope for the economy, and the sky is always about to fall, why should people even bother to invest anyway? Has CNBC ever looked at itself in the mirror when it probes the reasons why retail investors have withdrawn from stock investing? Why volume is down, why investor confidence is so fleeting? Are they content at CNBC to be the world best shills for the short sellers? Especially given that average investors, who don't use short sales or options to hedge themselves, have little idea of how much money can be made on down markets. Especially those that get tactically 'talked down' on TV by negative commentators who are 'talking their books" of effectively short positions.

Perhaps the New York-based media are simply being effected by the pessimism of the local investment banking community, as it retrenches, cuts staff even further, and targets 30% bonus reductions on average for what has been "lost year" on Wall Street. Pessimism in this environment has become conventional wisdom, indeed even fashionable. It perhaps explains why hedge funds have persistently missed the market rallies (just as they persistently missed the signs of the mortgage-finance market bubbles into 2006 and 2007). Unfortunately, their low returns for the year only lead to more efforts to talk down the markets in order to bail out their short positions and generate one last opportunity to buy back in at lower prices before year end.

CNBC and the others are definitely helping the short sellers out with their daily focus on whether the markets have come too far too fast (since, of course, what the Fed and the ECB are doing isn't going to work, etc.). Let's just imagine what's coming next: "Here is our next feature story -- 'Why America is the Next Greece!' Right after our next expose of those optimists out in Silicon Valley - we did such a great job talking down Facebook, let's go after Apple next: "What's Wrong with the iPhone 5?'"

And even the Chicago folks are on board with the culture of pessimism. Rick Santelli has evidently concluded that his experience in the trading pits of Chicago (and godfather to the Tea Party) qualify him to serve as Chairman of the Fed, Attorney General, head of the SEC, President of the United States, President of the ECB, Chancellor of Germany and for good measure the next head man in China. And in all these incarnations, he is certain that all the present incumbents are wrong and he is right. Gilbert and Sullivan, where are you when we need you? We have our very own Lord High Executioner.

Mr. Santelli has every right to trumpet his views, and he has earned his platform with good ratings surely. But he clearly can no be viewed as an unbiased "reporter'. He has an agenda on his sleeve (which is better than "up his sleeve" least he's is honest about it.) But where after all is the balance? Where is the effort to challenge the current "wisdom" that there is no hope, all is lost, all efforts will fail, all retail investors are doomed.

We've seen this movie before - back in 2009, 2010 and 2011, and even earlier this year. The confident predictions day after day in the Wall Street Journal, CNBC, Fox Business: the Euro is bound to fail; Greece will default and leave the Euro; Germany will abandon the Euro; the Euro will go to parity with the dollar; the Euro will collapse, Spain will default; Italy is next. None of these predictions has yet come true, but Armageddon apparently sells to the investor class - or what's left of them. Maybe CBNBC and the others will come to realize that the "unbalanced line" is costing them an audience.