FEATURE MATCH: CRAMER VS. STEWART – SCHEDULED 15 ROUND BOUT
CHRONICLED - (PART I of II – Will the fight go the distance?)
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INTRODUCING THE CONTENDAHS
The escalation of the public battle between CNBC’s Jim Cramer and COMEDY CENTRAL’s Jon Stewart has captured the attention of the media and stirred up water-cooler conversations everywhere (view Cramer/Stewart in 3 parts here). It all started on February 19 when CNBC’s Rick Santelli called on Obama to take notice of his outrage toward the concept of hard-working, taxpaying Americans paying for mortgages their neighbors could not afford and he was robustly backed up by Chicago Floor Traders who jeered loudly to make it obvious they are also opposed. Santelli called for Tea Parties across the country in this video clip, which quickly went viral.
ROUND 1 - ENTER JON STEWART
Jon Stewart is the comic host of Comedy Central’s - The Daily Show. The program appeals to a youthful demographic and to Liberals from any age group. It is a political lampoon and spoof poking humor mostly at conservatives and was invested heavily in fueling anti-Bush sentiment. Its success and popularity is tied directly to its Liberal bias and the show makes no bones about it. Stewart took exception to Santelli’s remarks and scoffs him in this segment, which also disparages all of CNBC by questioning their credibility as a legit business network. Within his piece, Stewart includes a vignette of clips and quips exposing the failure of CNBC to identify the financial crisis to investors before the stock market fell apart. Stewart invited Santelli on his program and Santelli first accepted then declined. Stewart’s mockery of Santelli was couched as an equivalence of Santelli’s comment that Americans should not have to pay for failed mortgages of individuals who bit off more than they could chew with Stewart’s outrage at the billions of taxpayer dollars that had been accepted by banks and insurance companies to prevent systemic failure. There is potential insincerity here, in that painting Santelli in this manner was a liberty taken by Stewart that appears to be without substance. As a regular viewer of CNBC I have never once heard Santelli voice support for the bailout money. If Stewart cannot produce Santelli making such statements then Stewart was either intellectually dishonest of frighteningly ignorant with his portrayal of Santelli and owes him a public apology. Only Stewart knows the truth.
Round 2 - ENTER JIM CRAMER
Part of the linked sound-bytes included clips from Jim Cramer and his Mad Money program on CNBC where Cramer attempts to guide investors with stock recommendations and various topical discussions of the financial markets. The string of bytes spotlights Cramer offering poor investment advice. It showed him as being overtly Bullish at the top of the market and recommending stocks that were overpriced when they were ready to decline. Some say that the avid Obama supporter Stewart focused specifically on Cramer because Cramer recently came to the conclusion that Obama’s agenda was anti-business, ignorant on the premise of capitalism and was hurting the financial markets further so he began to rant his displeasure with the current administration on his Mad Money TV show. Cramer is correct about the lack of sophistication of the current administration on the big picture of capitalism and the need to preserve its viability and systemic integrity. But Stewart is correct that Cramer shows little prowess as a financial advisor on his TV program. After 2 Rounds - Score 1 for each.
Round 3 - CRAMER TAKES UP THE CHALLENGE
The Stewart segment heated up public debate about the financial crisis, which is a good thing. Feeling personally attacked, Cramer decided to confront the situation and accepted an invitation to appear on The Daily Show. Pretty fascinating stuff to see two openly admitted Liberal Democrats in an old-fashioned street fight. When you watch the Cramer/Stewart 3-part interview there is no question of the outcome.
Round 4 - STEWART FILETS & SKEWERS CRAMER
This was a one-sided affair. Cramer showed up at the OK Corral with no bullets in his holster. For 20 some odd minutes Cramer dodged, squirmed, acted conciliatory, tried to bond with his detractor and went so far as to disavow his own network, Rick Santelli and even threw Henry Paulson under the bus, calling him a liar. It was embarrassing for Cramer. If there was an intergalactic black hole in the Comedy Central studio, I believe Cramer would have gladly jumped into it. It was difficult to watch someone who appears to stand for….well, nothing. Cramer did not even defend himself. Stewart criticized Cramer for his bad investment advice and chastised the entire CNBC network for not being a watchdog for the general public. Stewart spotlighted the CNBC interviews with CEOs who gave pep-talks about their companies which later were failing and begging for handouts. Stewart made some valid observations. But he is also uninformed about some things and this was Cramer’s opportunity to demonstrate the collective wisdom of his years as a capitalist and a professional in the financial markets… and he delivered nothing. This was Cramer’s grand moment to provide Stewart with a greater perspective of the financial markets, to pinpoint the specific ideological philosophies of ‘broad home ownership at any price’ that initiated the worldwide train wreck and of the basic human behaviors (why money always chases the rising asset) which is always the final arbiter of the way markets behave. He did none of that. Maybe he doesn’t understand these things himself; after all, he is a Liberal. ‘Pictionary’ should replace its definition of “wimpy” with a headshot of Cramer. Jim was so destroyed and cleanly picked apart by Stewart that in his own Friday segments on CNBC he made no mention of this highly visible slaughter. In the ultimate duel of two high-profile media Liberals, Stewart was Aaron Burr while Cramer was Alexander Hamilton. Ironically that famed historical duel took place in Weehawken, New Jersey, a very short distance from where Cramer lives and works.
Round 5 - STEWART EXPECTATIONS TOO HIGH
With the opportunity to educate him lost, Stewart remains in the dark or in denial about the key issues underlying and surrounding the financial crisis. His criticism of CNBC has some validity, but his full repudiation of them is not as valid. After all, CNBC is NOT the watchdog of the financial markets in the sense of acting as a Regulatory Agency. There are House & Senate Financial Services & Banking Committees, there is the SEC and there are numbers of government agencies who get paid to uncover frauds and oversee markets. CNBC is a network that reports on the activity in financial markets daily. It’s kind of like…. The Daily Show of Financial Markets. Anyone tuning into CNBC for specific financial advice to act upon is either crazy or ignorant. I watch the show every day and I would never make an investment decision based on what an anchor, reporter or self-proclaimed financial guru says. However, the network provides a very good service for those who want to know and gain insight into what is happening in business and the financial markets around the world. But to take specific financial advice and stock recommendations? I think not. Stewart’s notion that somehow CNBC should be a watchdog who could identify a financial crisis before it unraveled and warn investors to move their financial assets around is absurd. Absurd…. because it would not be possible even if that were their mission…. which it isn’t. They are not financial advisors and should not pretend to be. Besides, anyone who watches the network knows all too well that many guests did come on the air and talk about impending financial disaster. More than a few offered dire forecasts and warned of collapses in the stock market. Why didn’t Stewart pay attention to those folks on behalf of his 75 year-old mother?
Round 6 - NOT A DEFENSE OF CRAMER
At the same time, it is impossible to defend Cramer. He is not the best stockpicker or market timer in the world. Contrarily, he may be close to the worst. Which if true, makes him an excellent contrary indicator and that is a very useful tool when making investment decisions. That is how I utilize Cramer to factor my thinking for making investment decisions. Cramer is ALWAYS too euphoric at market tops and too gloomy at market lows. His stock ideas are usually poor performers, often disasters. Even when the stock market was strong back in 2007 it was uncanny how many of Cramer’s picks would drop 15, 20 even 30 percent when the stock market was going Up! On March 10, 2000 NASDAQ made its all-time high of 5132.52. Coincident with that celebrated event Cramer was so enthusiastic with technology and the internet companies that precisely 10 days before the Final Top he published a new list of MUST OWN internet stocks mostly trading above $100 a share called, The Winners of the New World, just as the internet bubble that Clinton sponsored was about to burst. Less than 2 weeks later the internet crash started and Cramer’s list of ‘New World Winners’ were decimated and turned into a complete graveyard disaster for any investor that piled in on Cramer’s glorified recommendations. Anyone watching and listening to Cramer for even a short interlude is aware of his propensity to be wrong and to be seriously wrong at the most inopportune moments. This should not be taken as a condemnation of Cramer, for if the truth be told, the statistical evidence on this one is overwhelmingly clear. The majority of people are ALWAYS wrong at the top and they are also ALWAYS wrong at the bottom. Cramer is in solid company, among the majority. If Jon Stewart or anyone else thought Cramer could somehow identify that trouble was brewing in the stock market and warn everyone to steer clear, they evidently have not spent even one minute looking at the history of Cramer’s behaviors and statements when markets are at extremes and near critical turning points. Anyone watching that program knows this. It is not a secret. Much has been published about the history of Cramer’s market performance. Using Cramer as the punching bag for bad investment advice reveals a degree of ignorance by Stewart that is unacceptable.
Round 7 - GREED IS GOOD
For actor Kevin Bacon and his wife to lose their fortune with Bernie Madoff is a terrible and tragic crime. (go read my comments about Madoff in last Thursday’s blog). The fact that they placed their entire fortune in one location highlights two inherent human traits that Stewart hasn’t come to grips with: ignorance and greed. There isn’t a legitimate investment counselor alive that doesn’t preach diversification as a core component of a financial plan. To ignore that one long-standing Golden Rule for investing is to do so at one’s own peril. Ignorance is not a defense for this. Of course it raises this question…. why in the world would anybody entertain and act upon the idea of violating the elementary rules of diversification for investment and planning with a multi-million dollar portfolio?
The answer is: greed. Not greed in the nasty, compulsive sense of a hateful miser, but in the sense of wanting to see one’s assets grow larger and faster. The appeal of that is sometimes strong enough to allow one’s logic and reason to become subordinate to their emotion of greed. It’s pretty simple, really. In “Wall Street”, Michael Douglas playing Gordon Gecko said “Greed is Good.” He was right. Greed is good. It’s the driving force that has been the backbone of the American entrepreneurial spirit that inspired everything from the Industrial Revolution to the Age of Technology. Greed is a natural emotion. It’s also why, as I stated above, the majority of people are Bullish at the top of markets. It feels good to make money and that is why “money always chases the rising asset.” It’s the human intention that separates what is good from what is bad. Greed factored into the actions of both Bernie Madoff and Kevin Bacon, but one was abhorrently dishonest and the other, we’ll say, was naïve.
FEATURE MATCH: CRAMER VERSUS STEWART - SCHEDULED 15 ROUND BOUT
CHRONICLED - (PART II – The Finale - Who Really Wins?)
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Round 8 - MARKETS FLUCTUATE – BROADLY – THE RED FLAGS OF EUPHORIA
It is not required for everyone to become an expert in the financial markets. It is required for everyone to apply a modicum of common sense before they make investment decisions. The gratuitous statement by Stewart that his mother was led down the primrose path under the auspices of “invest for the long-term” by her advisors cannot be taken seriously. At 75 years old she was born in 1934, in the midst of The Great Depression. Her family experienced the realities of a severe economic downturn and was aware of the failed financial markets, whether they were invested or not. She also experienced the terrible effect of high interest rates and inflation of the 1970’s and the Big Bear Market of 1973-74 which fell by 50% on the DOW JONES while many individual stocks fell by as much as 90% or went out of business. Nearly every stock fell to single digits. Any adult alive today experienced the Crash of ’87 when the stock market fell 22% in one day and over 30% for the entire decline. The NASDAQ which peaked at 5132 in 2000, even today, some 9 years later, sits at 1404 and remains a whopping 73% below its peak even after nearly a decade. Who is Stewart kidding? Is this just his Liberal ‘blamer’ tendencies coming to the surface as he vents anger?
Every period of severe dislocation in the financial markets is precursed by a period of euphoria. These euphoric periods are part of a transitional process that lasts months or even years while the financial markets are in a topping phase. There are always red flags and there is never a shortage of financial professionals pointing them out, including on CNBC. Of course, simultaneously, there are others pointing out that strong markets are a sign of even better things to come. Everyone must choose for themselves whom or what to believe. One flaming red flag was the 2007 appearance of a new program, CNBC’s - Fast Money. The idea of a TV program dedicated to day-trading and other short-term strategies was a major warning sign that optimism was transitioning into euphoria that would reach an unsustainable level. The idea that an average investor watching from home could succeed as a day-trader is preposterous. Most professionals cannot do it. Day-trading is a necessary part of the financial markets as it contributes to providing ‘liquidity’, a critically important element for financial markets to attract interest, facilitate the movement of capital (the life blood of the economy) and build a foundation upon which to grow. However, it is NOT a strategy for anyone other than those who can dedicate themselves 100% to the task - and have the bankroll, the personality and the temperament to withstand lots of losing trades. Most people cannot succeed in that arena. Cramer missed his royal opportunity to educate Stewart about the importance of liquidity and why all the elements of a free trading marketplace are equally important: long-term investing, short-term trading, hedging, shorting, portfolio diversification and rebalancing – all make up strategies that contribute to the overall liquidity required to keep financial markets vibrant.
Round 9 – THE DEFINING MOMENT – “SOLD TO YOU” – A LESSON FOR STEWART & CRAMER & EVERYONE
A moment that singularly encapsulates Stewart’s misguided expectations occurred on CNBC few years ago. The stock market was making all-time highs. It was an options expiration Friday and it was 15 minutes before the closing bell. Anchor Maria Bartiromo was working the exchange floor and about to interview one Floor Broker they talk with regularly. There was a feeling of euphoria all over the world as BOTH Wall Street AND Main Street was experiencing the joy of rising assets and visualizing their retirements getting closer. Maria was visibly overtaken by the same glowing emotion. She pointed to the exchange’s overhead electronic ticker which was displaying the large-block buy and sell orders, a requirement during the last half hour before markets close when options expire, to keep volatility to a minimum. The large block orders revealed by the electronic scroll showed mostly buy orders to close out a market session that had rallied strongly…. on top of what had been years of rising stock prices since the market bottom in 2002. She queried the Floor Broker and to Maria’s surprise, he wasn’t sounding too optimistic about the stock market. Maria responded suggesting that he can’t be serious, that stock prices were in a strong Bull market, that things looked good all over the world and pointed out how there was nothing but buyers heading toward the closing bell. She said something like -- Don’t you think it’s smart to be a buyer? And I will never forget what this Floor Broker did (they still interview him though I can’t recall his name). He pushed both his arms out extended in Maria’s direction with his palms open-faced toward her as if he were communicating an actual trade on the New York Stock Exchange Floor and he said three words – “sold to you.” I will never forget that.
Jon Stewart is not convincing that CNBC doesn’t present the realities of the total experience in the financial world. In that single moment both sides were well represented and that is information which is useful for shaping one’s investment strategy. If Stewart chose to believe and place his faith in CNBC anchor Maria Bartiromo or in contrary indicator Jim Cramer, that is his choice. If you or I chose to believe in the experienced NYSE Floor Broker, that would be our choice. And therein hides the basic hypocrisy of the Liberal existence. Their tendency to blame others for the choices they make and shirk the concept of individual responsibility. It was all right there, Jon.
Round 10 - THE HYPOCRISY OF JON STEWART
To his credit, it is absolutely correct that Stewart shares and expresses the anger of America about the financial mess. It is admirable that he wants to expose truth and “out” the culprits. Unfortunately, he doesn’t seem to know who those people are. Or…. he doesn’t want to know. Cramer missed the perfect opportunity to take the initiative to enlighten him. Then consider this; for Stewart, who has built his success and reputation on pushing the Liberal philosophy to the youth of America, it might be hard to accept the truth and even harder to promote it on his program. After all, what the hell would be funny about that? !!! ➜ What does a man choose to do when the ideology he has promoted and extolled turns out to be the source and enabler of the very crisis he has become so vehement about? He’s mad at Wall Street, banks, The Fed, AIG, investment bankers, yippee. He spawns his populist position without much useful investigation. Has Stewart ever asked the question: Why would the CEO of AIG wake up one morning and think there was an opportunity to launch a new business in underwriting risk for mortgage backed securities? After all, every CEO goes to bed at night thinking of ways to grow and expand their business and uncover new market opportunities. That’s what they love. That’s the dream they pursue. That’s what business is.
Round 11 – STEWART CLOSES EYES/MIND TO FRANK, WATERS, SCHUMER, DODD & FANNIE MAE
Doesn’t Stewart want to know how that market opportunity for AIG was enabled? Who enabled it? What guiding philosophy motivated the aggressive bank lending? What efforts to regulate the creation of all that paper were continually blocked? And who blocked them? Stewart isn’t interested in those things? Has Jon Stewart ever asked those questions? Certainly he must have thought about them once or twice. Or is it just not good TV for a comedy skit geared toward a Liberal audience? This week a news story emerged about Maxine Waters and her efforts to curry favor for a bank that her husband has ties to. Is it any coincidence that she was one of the staunchest promoters and defenders of Fannie Mae? Stewart uses the Madoff crime to fill time on his comedy show but doesn’t care a whit that Democrats Schumer, Waters, Lautenberg and Hillary were on the Madoff political contribution list. Did any of them actually know Madoff, visit with him, and why did they ignore early warnings from independent parties that were presented about the scam? Stewart is not interested.
Back in 1999 (pre-Bush), Steven Holmes published the article, Fannie Mae Eases Credit To Aid Mortgage Lending which predicted the housing crisis. The opening sentence in that article: ‘In a move that could increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.’ It quoted then Fannie Mae Chairman Franklin Raines saying, “Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements.”
Barney Frank was the most prominent member and ranking Democrat of the House Financial Services Committee in 2003-04 and now is its Chairman. Here is a timeline of the warnings about Fannie Mae showing Barney Frank blocking efforts by Regulators. Here is Maxine Waters and others blocking the Regulators in 2004. Here’s an article from last September titled, Where was Chris Dodd? chronicling the political roadblocks against those wanting to regulate Fannie Mae. There are even ties of Obama to Fannie Mae as seen here. To express myself using Jon Stewart’s own expletives to Cramer – Where the ‘f’ has Stewart been all this time? What kind of propaganda has he been reading? None of this exists in Jon Stewart’s world. In his own words…. This is important stuff. This is serious. Stewart’s blindness and denials of who enabled the housing mess reflects attitudes no different than Holocaust deniers like Ahmadinejad.
Round 12 – A TALE OF TWO LIBERALS
With the election of Obama, my reaction was that two positive processes evolved. First, that the country valiantly showed that most Americans have put the long struggle of racism in the rear-view mirror and were confident to move forward with an elected President of a minority race. This was a very powerful statement that told every young child they can aspire to become anything they want, without limitation. Second, is that the next 4 years would expose the Liberal hypocrisy under the microscope of daily scrutiny upon which it could not sustain itself. In that regard, the hypocrisy is being exposed faster and more furiously than even I could have imagined. If my vision is correct, America will be quite disgusted with the Liberal Agenda long before the 4 years is up and voters will wake up to realize that the only way to get away from it is to reject the Pelosis, Reids, Schumers, Rangels and others who live in a private fantasy world of elitism and double standards…. while feigning representation of the common man and woman.
We just witnessed two Liberals cannibalize each other while neither was capable of addressing the source of the financial crisis. This was really a fight between two media guys who voted for Obama and when one started to waiver in his support, the other called him out. Rick Santelli should reconsider his invitation to The Daily Show. He can do no worse than Cramer and he can educate Stewart about the history of financial markets, liquidity, market sentiment, red flags, and who is responsible for enabling the creation for what has become known as toxic paper. He can ask Stewart where he draws the line on individuals being responsible for their own behaviors and choices. Since Stewart supports taxpayers bailing out homeowners who made very poor decisions based on a widespread belief that home prices would keep going up (once again the predictably universal behavior of humans as ‘money chasing the rising asset’), does he also support taxpayers paying off credit card debt from people, largely the same people, who made more poor decisions? Does Stewart believe that rewarding bad behavior will actually change behavior?
Round 13 – THE MORALS OF THE STORY
So what have we learned? We learned that most people, including Cramer, are Bullish at the top of the stock market. We learned that human behavior tends to ignore history and repeat the mistakes of the past. We learned that whether it be stocks or home prices or any other asset, when they have been rising for extended time frames, it is basic human nature to believe they will continue on their upward path. We learned that when investment advisors say that the single most important part of money management is broad diversification…. they mean it. We learned that within every generation, the stock market experiences periods of wide dislocation as a natural by-product of capitalism. We learned that CNBC is a network that provides access to business people and market information but is not a watchdog agency and that CNBC employs anchors and reporters that have the same human traits and frailties that are inherent in the human species. We learned that Cramer is useful for investment ideas but only as a contrary indicator. We learned that if Maria Bartiromo says ‘Buy” and an NYSE Floor Broker says “Sell” -- bet on the investment professional. We learned that Liberals are not interested in unearthing the truth about the genesis of the financial crisis, but prefer to lay blame on those who represent a simplistic populist view. We learned that Jon Stewart is a comedian who takes himself seriously but hasn’t yet made the commitment to himself to put his Liberal ideology aside to use his platform to get to the core of the issues and assume responsibility to properly enlighten the youth of America about who really set the agenda of promoting the political inertia for broad home ownership at any price, which led to this mess.
Round 14 – THE FINAL DECISION
The match has been called a TKO – The public is the big winner. Each day that the Liberal hypocrisy goes under the hot spotlight the public learns more and more about what it means for a country to move far left. The more the public sees of this, the less they will like it. Cramer and Stewart both lost on this one, although to his credit, Stewart at least stood up for his own misguided beliefs, while Cramer did not even stand up for himself. I will watch The Daily Show when Stewart turns his attention to frying those in Congress and the Senate who promulgated the housing crisis, incentivized the banks to lend aggressively, enabled Fannie Mae to facilitate the mortgage-backed securities market, blocked all efforts by Regulators to rein in excessive lending and thereby opened the opportunity which allowed AIG to conclude that a new market for an insurance product had materialized. Now Stewart’s got to decide if it’s about comedy or it’s about a serious search for truth and getting mad enough to expose the right people. Interesting choice…. Isn’t it?