Different Year, Same Problem – Can CNBC Fast Money Ever Change Its Spots?

 

CNBC Fast Money is a show directed at those who are interested in quick trading of financial assets, mainly stocks. It is a fun show that tries to imitate the “jock” culture that used to pervade Wall Street trading rooms. They claim they provide advice from experienced traders but they don’t really care about whether their viewers make money or lose money. What makes us think that?

Everybody knows that you make money by buying low & selling high. Note that involves two actions – first you buy or initiate a position and second you sell or close your position. Trouble with CNBC Fast Money is that they devote their entire show to the first, meaning what to buy or what position to initiate. Then they “forget” to track or follow up on their recommendation. They just move on the next day, the next week to the new set of recommendations they throw at their viewers.

What can happen to their viewers? Look at the example we discussed on May 9, 2009 in our article Tim Seymour Admits A Real Problem With CNBC’s Fast Money Show. Tim Seymour, a CNBC Fast Money  trader, had suggested viewers sell short FCX, the stock of Freeport McMoran. Seymour had added that he has shorted FCX himself. So he had put his money where his mouth had been, That must have given viewers greater confidence in shorting the stock themselves. 

But a week later, by May 8, 2009, FCX was higher making Seymour’s recommendation a bad one. So any CNBC FM viewer that had followed Seymour’s recommendation was sitting on a loss by May 8, 2009. 

When confronted on the show, Tim  Seymour protested and said FCX had dropped within a day or two of his recommendation and he had closed out his short position for a profit. He explained this and added on this nationally televised TV show “This is a problem with the show.

Understand what had happened.  Tim Seymour made the Short FCX recommendation publicly in the nationally televised CNBC Fast Money show but covered his short in the next day or so in private. He made a profit as he said. But when did he or CNBC inform the viewers? On May 8, 2009 after the position had already turned into a loss. So Seymour made a profit while the viewers of CNBC Fast Money probably suffered a loss. 

This is a problem, indeed. But the only problem Seymour probably saw was that he was being blamed unfairly. That his unsuspecting viewers had suffered a loss didn’t seem to be a problem for him. At least that’s the way it appeared to us.  

You would think CNBC Fast Money would have addressed this problem in the past 7 years, right? Have you ever seen a leopard change spots? Sadly, CNBC Fast Money is just the same. Look what they did in the past few days. 

CNBC Fast Money featured Savita Subramanian of Bank of America/Merrill Lynch on May 31, 2016. Ms. Subramanian is a favorite of CNBC Fast Money. She was there to discuss the Bank of America/Merrill Lynch call for a 15% decline in the S&P 500 during this summer. A big big call indeed. What made Ms. Subramanian predict a 15% decline during the summer? In her words:

  • “First of all, we have the Fed embarking on a tightening cycle amidst a profits recession … our economists think there is a real possibility we do get a summer rate hike … which is another reason I am worried about stocks; I don’t think the market is pricing in a summer rate hike

Rational & sensible call, wouldn’t you say? A 15% decline would worry most investors. So some viewers might have sold some portion of their stock holdings in fear of what Ms. Subramanian had predicted on CNBC Fast Money.

Three days later, on Friday June 3, the monthly non-farm payroll number came in at 38,000. This stunned markets and the probability of a Fed interest rate hike was slashed. Then, on Monday, June 5, Fed Chair Yellen gave a dovish speech. After that speech, the probability of a Fed hike in rates fell even further.

So the raison d’etre for Bank of America/Merrill Lynch call of a 15% decline didn’t exist anymore. What is Ms. Subramanian of Merrill Lynch saying now, we wondered. So we asked Scott Wapner, a big shot anchor of CNBC Fast Money, to check with Ms. Subramanian and report to viewers. Ideally, CNBC Fast Money should have invited Ms. Subramanian right away on Monday and asked her. After all, CNBC Fast Money had real responsibility to viewers who might have listened to Ms. Subramanian and reduced their stock positions. At least that’s what we argue.

What would you know? Neither Scott Wapner nor anyone else at CNBC Fast Money bothered to respond. More importantly, they have not re-invited Ms. Subramanian on the CNBC Fast Money show to tell the viewers whether she still sticks to her prediction of a 15% decline in the S&P 500 or whether she has changed her call. 

So Mr. Tim Seymour, the problem with the CNBC Fast Money show you identified on May 8, 2009 is still a problem. Neither CNBC Fast Money nor you have done anything in the past seven years to fix the problem. How do you sleep at night, Mr. Seymour? Or are you still proud of this show that you are a part of?  

All we can do is to remind viewers of the most important mantra in watching CNBC safely – Caveat Viewer

 

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