Wednesday, April 9, 2008

propaganda for dummies finance edition

Propaganda for dummies- finance edition


1. openly question if there is a recession inviting all sorts of "experts" to give their impression.

2. keep the tone of the dialogue as an opened ended future event, so you pose questions like:

"could we be headed towards a recession?"
as opposed to:
"are we in a recession?"

ask "experts" questions like this:
"do you foresee a recession?"or "is a recession on the horizon?"

3. let experts answer but never ask it of known bears. if you do have a counter point man on hand like CNBC and FOX do when they have peter schiff on to induce a WWF style tit-for-tat debate.

4. provide doom and gloom estimates for jobs and earnings so that when they come out negative you can claim they weren't as bad as expected. suddenly losses become reasons for stock rallies.

5. at first cite strong employment data to support that we aren't in a recession.
when the data turns negative claim that the new paradigm of the economy shouldn't rely on outmoded stats that don't reflect reality.

6. when stocks are doing well, tell people the bears are crazy and are missing out on the bonanza.

when stocks are in the crapper tell people its bargain hunting season, and that stocks are "cheap" compared to their inflated prices of 6 months ago

7. use any sudden weekly drop in commodity stocks, especially gold to suggest the commodity run is over.

when bank stocks fall by as much, claim there is blood in the streets and its time to buy.

8. build false hype around important "low" points in the market. if indices breakdown below those lows, cite the stocks that are still strong and claim "its a stock picker's market"

9. if stocks bounce off a major low, claim the bottom is in right away and host experts who will speculate if the bottom is indeed in, (even if stocks have lost upwards of %40 of their value in 6 months and bear markets tend to take several quarters to years to play out.)

10. disseminate rumours that Warren Buffett is buying something. based on nothing but rumour or baseless speculation, lend false credibility to the spectacle by having commentators evaluate these proposed purchases by Buffett by saying things like:

"we've heard that Warren Buffett may be looking at railroads, what do you think is going on in his head right now?"

you create a story out of nothing by head-nodding experts who are always will to give their opinion on what they think other people may or may not be thinking.

11. feign impartiality by questioning politicians "strong dollar" policy remarks before transitioning into the familiar "could the US dollar fall farther if a recession is looming?"

12. have legitimate economists like Noriel Roubini discuss reality but place him outside of prime time and use awkward camera angles where they go way too close on his face. if you ever noticed his appearances on Canada's BNN or Fox sometimes you will notice this technique.

this gives the effect of an overbearing and unpalatable persona even if the person is giving reasoned commentary. people tend to respond better and find subjects more engaging if the person discussing it is visible from the shoulders up and not just a large face shot. its subtle and possibly nuts to suggest it but i wouldn't put it past anyone.

13. flood the newsreel with bad news at the same time as somewhat good news to distract people. federal bail outs seem like better news in comparison to UBS writing off billions.

14. use smoke screens to make things seem better, say things like:

"the markets have already priced in the write downs"

"the markets are forward looking"

"markets have over reacted to the credit problems, good companies went down with bad ones"

"lets not dwell on the past and move forward with the recovery"

"in this low interest rate environment, banks will be able to recapitalize while de-leverage at the same time in order to clean up the balance sheets and clear their books of undisclosed level 3 assets that were previously mark-to-model, so their impact on the forward P/E is in line with analyst estimates for Q4 of this year"

15. ensure banks don't issue "sell" ratings to stocks until they have bled themselves dry.

the fear of sell ratings are said to induce panic and could make things worse.

few mention that there could be fundamental reasons why these stocks should go down, instead just focus on the sheep herding effect of a sell rating.

16. talk up scandals within finance and politics to avoid the critical issues. Governor Spitzer's scandal the case in point.

17. ask experts the same question and compile the different answers until people have no idea what really happened as each expert gives a slightly different account of the story.

bear sterns bankrupt
bear sterns bail out
bear sterns bought by JPM
bear sterns on the brink of collapse
bear sterns facing derivative trouble
bear sterns forced margin call
bear sterns hedge fund implosions
bear sterns saved by JPM
bear sterns rescued by the fed and JPM
the fed loaned money to JPM to rescue bear sterns
JPM saved bear sterns with the help of the fed
JPM only bought bear sterns to get their clients
JPM is well capitalized in light of bear's assets
fed prevents a full scale disaster
credit markets saved in light of fed bail-out of bear sterns


18. take part in the plan to take the public's money to save the select few banking titans. all while telling them its other people's fault.

ill call it the "rouge trader" byline.

the rouge trader represents everything that the mass media wants us to believe about whats wrong with the markets. that men acting alone and in the worst interests of their clients funnelled millions away from respectable institutions.
if only the legal establishment could save us and persecute these dastardly rouge elements who are the scourge of industry.

3 comments:

1111 said...

Everybody has an agenda. Read this
http://www.ft.com/cms/s/0/171b8aac-02b5-11dd-9388-000077b07658.html?nclick_check=1

J said...

a sign on account is required to
read this article, please post a link to the full aritcle as only the first few sentences show up.


thanks,

J

1111 said...

Take financial talking-heads with a grain of salt

By Mark Sellers

Published: April 5 2008 04:48 | Last updated: April 5 2008 04:48

Everyone acts in his or her self-interest. This is a key facet of humanity, and keeps our society moving forward.

Think about that the next time you make an investment decision. As an investor, it is in your interest for your portfolio to do as well as possible with the least risk possible. Unfortunately, this is not the goal of most of the people you may rely on for news and advice. There are conflicting incentives everywhere in the world of finance.
EDITOR’S CHOICE
Mark Sellers: Take advantage when good companies come to market - Feb-23
Mark Sellers: Bearish signals could be good news for stocks - Jan-26
Mark Sellers: Rational investors rejoice - Dec-15
Mark Sellers: Investors, cast off your bonds - Nov-16
Mark Sellers: Dodge the sharks and keep yourself afloat - Sep-21
Mark Sellers: Irrational world of institutionalised money managers - Aug-24

This is something to keep in mind when you read the newspaper, watch CNBC, or manage your personal finances. Various stock market players have different incentives, none of which is necessarily in your best interest:

Government officials. An elected official’s primary motivation is to be re-elected. Voters don’t tend to re-elect politicians who let the stock market go down. So, government officials have large incentives to prop up markets to the greatest extent possible. Every time you hear an elected (or appointed) official talk about the market, you should take it with a huge grain of salt. These people only want to see stock prices go one way – up – because it’s in their best interest. But it’s not in your best interest unless you’re a short-term investor who only cares about the next year, not the next decade.

It’s not in your best interest because, to juice the markets, politicians like to pump massive amounts of money into the capital markets and bail out bankers who have made dumb decisions. This works in the short term but leads to moral hazard, excessive risk-taking by investors, and inflation – all long-term problems. As an elected official, though, you aren’t worried about long-term problems. You want to get re-elected. You’re worried about the next 12 months, not the next 12 years.

Financial advisers. Many advisers are paid on commission from mutual fund companies into whose funds they place client assets. If you use an adviser who is paid in this manner, watch out. You will be put into funds that are probably not the best choices, simply because the adviser has to earn a living. Since advisers don’t explicitly get paid based on performance, they have no incentive to put you into above-average funds.

You should work with “fee-only” advisers who are paid by the hour.

Stockbrokers. Brokers like you to trade a lot. Some are more unscrupulous than others. Enough said.

CNBC guests. When you see a so-called “expert” voluntarily appear on CNBC, for no payment, ask yourself why this person is appearing on television. The reason is that the person is acting in his own interest. For a money manager, that means generating business for his investment firm. A manager will go on TV and attempt to sound as intelligent as possible so viewers will think he’s smart, and invest in his fund. A second, more insidious reason a money manager might appear on TV is so he can pump his own stocks, thereby getting a short-term bounce in the share price – at which time he may be selling shares to you, the viewer. A third reason is vanity; people like seeing themselves on TV.

Financial news media. If you work for a financial broadcaster such as CNBC, you want the market to go up. This is because, in bull markets, more people are interested in stocks, so ratings are higher. The financial news media have an inherent bias toward bullishness because their executives know this is good for business. A subtle push from the top can taint the coverage of an entire news organisation.

Investment newsletters. Good investment ideas don’t happen on a schedule, and may not last long. But that doesn’t matter to newsletters; they require a certain number of investment ideas to write about every week. You can see the incentive for them occasionally to publish stale, or inferior ideas, that fill space. So my advice would be not to take newsletter stock recommendations too seriously.

Wall Street analysts. Don’t believe anything you hear from a stock analyst. Most are honest and competent, and some aren’t, but you don’t know which are which. Gather your own data, make your own decisions. If you are incapable of doing that, either use a service free of conflicts of interest such as Morningstar.com or Value Line, or don’t invest directly in the stock market.

Hedge fund managers turned journalists. The reasons for a hedge fund manager to write for a newspaper such as the Financial Times are the same as those for a money manager who appears on CNBC, with the added possible reason that maybe the manager enjoys writing once in a while.

And that’s partially the case with me. But after writing for this publication for two years, I have decided that I no longer want to write in a public forum for non-clients because it’s not in my best interest to do so. I’m not trying to raise capital, I don’t feel comfortable appearing to be pumping up my own stocks, and I have no desire for fame or to see my name in print any more. So this will be my last article. Thanks to all of you who have read my columns and written to me.

The writer is a former equities strategist at Morningstar who manages a hedge fund, Sellers Capital, in Chicago