Stephen Bernard, AP Business Writer, writes today:
“NEW YORK (AP) — Stocks tumbled Thursday after two disappointing economic reports renewed investors’ concerns about the pace of a recovery. The Dow Jones industrial average fell about 165 points in afternoon trading. Broader indexes also fell by more than 1.5 percent. Interest rates also fell sharply as investors flocked to the safety of Treasury bonds. The Labor Department said claims for unemployment benefits rose unexpectedly last week and the Federal Reserve of Philadelphia said manufacturing activity in the mid-Atlantic region has dropped during August.”
Sounds like a simple report from the AP, right? Nonsense. Think about the two words bolded.
Let’s be frank: Anyone giving a view to a significant audience is obliged to be truthful. Now, consider this excerpt from CNN today…noting the “angle” (and that’s being nice) that CNN reporter Ali Velshi takes:
KEITH MCCULLOUGH (GUEST ON CNN): I think what’s happening in Europe is just a preview as to what’s going to happen in the U.S. It all basically starts with debt. So if you believe as a government official that you can solve the problems that are anchored in debt with more debt you are going to end up with the same problems that the Europeans are facing. And I think that we are three to six months away from that coming home to roost here in the U.S.
VELSHI (CNN ANCHOR): Why is it that lots of people go out of their way, Keith, to tell us how the U.S. is not the same as Europe? Our debt issues are certainly are not the same as Greece’s, as Italy’s, as Portugal’s, why are you suggesting that we will get into the same pickle?
MCCULLOUGH: At the end of the day from a deficit perspective, the U.S. — the deficit as a percentage of your GDP is exactly like Greece. It’s going to be pushing close to 12 percent. And anytime we have an issue, like today, for example, with the jobs report what is the answer? The answer is more government, more government spending which is going to simply keep pushing that deficit?
VELSHI: Hold on. What are you talking about? When you have a jobs report like this week, the answer is more government, more government spending? Where did you hear that from? We’ve been discussing that endlessly. That has not been anyone’s suggestion.
MCCULLOUGH: Well I think that that is definitely going to be the suggestion. If you look at this mornings …
VELSHI: Keith, this isn’t an opportunity to just come up on TV and bash government. What are you talking about?
MCCULLOUGH: This morning’s number, if you look at the job ads, 400,000 of them were government-hired workers.
VELSHI: So no one has come out and said, oh my god, let’s have 800,000 government jobs next month. Everybody has said, this is not the way we actually want things to go. We want more private sector hiring. Christine, have you heard one person telling you that this is fantastic; we should have more government hiring? I don’t know what Keith is talking about.
VELSHI: I don’t understand what your premise is, Keith, because that’s not the answer. What should we be doing differently?
MCCULLOUGH: Well the answer will be, from a political perspective, that is a forecast, Ali. That is a forecast. That is what government’s do that have problems, they spend more and more money, taxpayer money to hire.
More from the transcript:
MCCULLOUGH: I think that, look, the market’s ganging up on the three of you because at the end of the day the market doesn’t lie, politicians and people do. And the American government said they were going to solve this than you can go do that. But risk management Ali, starts with watching what the market is telling you.
VELSHI: I hope the market is as cruel to me next year as it was last year. I hope I suffer through another 70 percent gain in the broader markets, Keith. If that’s your biggest plague that you wish on me, I’ll take it.
Consider those last few sentences of arrogance from Velshi as you read the stats that he forgot to mention:
The S&P 500 (SPX) closed on 5/22/2000 at 1400.72 and closed on Friday 5/28/2010 at 1089.41. That is a 22.2% loss in value in ten years of buy and hold investing not allowing for inflation. That means a buy and hold investor lost 22.2% of their money plus another 20% for inflation — a 42% haircut. The period of history the buy and hold advocates really don’t want you to know about is 1929 to 1954. The highest close for the Dow was 381.17 on 9/3/1929 before the beginning of the great bear market, and it took 25 years to get back to ‘even’ on a nominal basis (not counting inflation). The Dow closed above 381 for the first time on 11/23/1954 after the 9/3/1929 high.”
Does Velshi seem like an honest guy as he yucks it up about “suffering through a 70% gain” while failing to mention the real stats [the real stats of buying and holding being underwater for over 10 years]? No, he doesn’t. Is he the type of guy who should be educating anyone about money and markets? Clearly not. As a teacher, I resent Velshi’s reckless use of a CNN megaphone to preach to many who surely don’t know that he is full of it.
***
One reader responded to my comments above by saying:
Isn’t what you’ve written below libelous (not to mention an unnecessary personal attack)? ‘Does Velshi seem like an honest guy as he yucks it up about “suffering through a 70% gain” while failing to mention the real stats? No, he doesn’t.’
The libel is? The personal attack is? The unnecessary part is?
Since you have thrown out a very specific and unfounded attack against me (libel), and since you have failed to back your view in any way, it is assumed that you agree with Velshi (that is unless you correct my assumption).
With Velshi tossing out that 70% line he is saying clearly:
1. That he made that 70%.
2. That he is a buy and holder.
So if he is a buy and holder, and he says he made 70% while ignoring the prior 10 years where all buy and holders are still underwater — he is manipulative at best. Or, and I guess this is possible, perhaps Velshi perfectly timed the bottom from March 09 to May 10 and that’s how he made his 70%? And if he is this wonderful market timer, capable of nailing bottoms and tops perfectly, where is this all disclosed?
When someone appears on TV regularly to large audiences, when they preach money and markets, and when they make the statements Velshi does, I stand by my view. The fact that you are remotely sympathetic with Velshi, and since you seemingly see nothing wrong with what he is doing, you make my point better than I ever could.
“Dear Michael Covel, I’m a financial professional analyzing the financial markets of any type. I’m working free, not dependent to ant company or institution. During last 6 months, I aware of an important formation taking place in DOW. It’s the long term SHOULDER-HEAD-SHOULDER formation which will lead DOW to fall down well below 5,000 assumably 1,000 to 2,000 band within two years or three. I’m not sure how to read this decline and its consiquences [sic], which is very sharp, the second after 1929, maybe the first of its kind. It certainly lead to a crisis by affecting first USA markets and then soon the rest of the world. With this decline, DOW will reach the lower line of the “increasing trend path or band of all time” (100 years) and then a new era will start, and DOW will reach 10,000 points again in 10-15 years of time, and then it will reach 100,000 within next 50 years. Note that this is just a forecast,as hundred thousands of analyst doing every day, but this is of its kind and a bit different then usual when you think of time span and its possible effects. Wait and see, test and prove my view with no doubt it will happen. Friendly speaking, I want to convert this forecast into cash. (It’s just a forecast before it occurs).That’s why writing to you. I think Soros fund management is the right place to make use of this info into cash in most effective way possible. Dear Michael, I appreciate if you share this forecast with George Soros himself.”
Best Regards,
Cemal, S.
I love crazy people. Can his prediction happen? Sure. Is there any system that he has to get to that forecast beyond making it up? No.
Howard Lindzon has said some very nice things about my books. Now that the disclaimer is out of the way: what in the world is the purpose of StockTwits?
For example, from their ‘about us’ page:
“Log into the site with your Twitter details or download the StockTwits Desktop and you will be joining a community where market participants share their very best ideas in a continuous real time and open conversation.”
And:
“The beauty is the simplicity. Messages are short and allow a person to read several interesting bits of stock information from various sources at a glance. The lightweight approach highlights the power of delivering vertical value to a horizontal community, where both constituencies share a common passion: the desire to consume and share real-time information.”
And:
“In essence, StockTwits® helps people interested in markets socialize ideas. Whether you are a short term trader, swing trader or investor, whether you prefer stocks, Forex, options or futures, whether you want to eavesdrop or participate, you will find a wealth of information streaming at your fingertips.”
Sure, everyone has a view, but not everyone has a view that you should pay attention to. In fact, if trading as a trend follower ALL of these views are worthless.
Let me blunt: I know who the best traders on the planet are and NONE of them do any of this. Agree or flame me because I am 100% dead on telling the truth. This is financial news and information taken to its useless extreme by the Free Stocktwits.
First thing I asked, “If I buy gold from you when do I ever sell?”
The punk on the phone (and that is being charitable) said:
“Gold has never crashed.”
“If gold was to go again from $800 to $200 you would have plenty of warning to sell.”
I asked who was going to give me that warning. He said, drum roll please….they would. Everyone should call and have this conversation. Block your number and only give them your first name. Ask them the same questions I did before they get any details from you. It’s an experience!
Tim Paradis, apparently an AP business writer, penned this ditty this morning:
Investors’ rising fears about consumer spending are turning stocks into a risky investment again. Stocks plunged and Treasury prices soared Monday as investors around the world feared that consumers are too anxious to lift the economy into recovery.
More from Paradis:
The mixed economic readings of the past several months aren’t surprising. A turnaround produces mixed messages because not all parts of the economy recover at the same speed and some indicators start to show life before others. Analysts say investors who had expected the economy would rocket higher got ahead of themselves by sending stocks up so quickly. Many economists have predicted a gradual recovery in the economy, in part because unemployment rates could remain high.
How does Paradis draw all of these so nicely wrapped up conclusions? His background gives tremendous insight into his keen economic and trading insight. Rhetorically, I ask Paradis:
1. Who are these investors? Long only Dow investors?
2. Is 1.73% down (drop at time of me reading his article) a “plunge”? And for those who are short isn’t that a good thing?
I could go on. Perhaps others have observations about Paradis’s observations?
