Did CNBC’s Fast Money give us an Investment Signal?

Editor’s Note: This is an article about financial television and financial media in general. It is not an investment article and no one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions that should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances. .

It is a tenet of investing folklore that the Business Press usually proves to be a reliable contrarian signal. For example, in 1982, the cover of  BusinessWeek asked whether equities were dead, just as a 30 year bull market in equities was emerging.

Today, CNBC represents mainstream business media for the financial markets. In our earlier articles, we asked on two separate occasions whether specific actions of CNBC Management or the behavior of CNBC Anchors gave us actionable market signals. In both cases, we were able to demonstrate later that these actions did do so.

This week CNBC did a dramatic 180 degree turn in their approach to markets. Since we began watching CNBC, their basic mantra has been “buy stocks and hold them for the long term”. Their gospel was that holding stocks for the long term was the best way to meet your long term objectives. The vast majority of money managers they trot out on their network also chant the same mantra. CNBC realized long ago that viewers who sold stocks stopped watching CNBC. So the buy and hold approach was also a ratings protection approach.

But 2008 has been a disaster for this approach. US Indices like the Dow Jones Industrial Average and the S&P 500 are down almost 40% this year. The Emerging Markets championed by GLG2 cheerleader (Global Liquidity Global Growth), Maria Bartiromo are down more 50%-60% as a group. So clearly buy and hold has been a bust.

So this week, CNBC changed its tune and proclaimed the Death of Buy & Hold approach. Maria Bartiromo herself began using this phrase. The culmination of this transformation came on Friday, November 14 on CNBC’s Fast Money when they released an entire segment titled “Death To Buy & Hold”.

Watch this clip at www.cnbc.com/id/15840232?video=928611012&play=1

Notice the aggressive “To” in the title “Death To Buy & Hold”. Rest of CNBC is content to be conservative and use the
“Death of ” phrase but NOT Fast Money. In its take no prisoners style, Fast Money wants to put the mentality of buy and hold “To” death. The only missing touch is Dylan Ratigan thumping his desk like Al Capone did in his rant in Untouchables “I want him dead, I want his family dead”.

We enjoy watching Fast Money and hope that Dylan Ratigan & his team do not mind us poking fun at them. Besides the frolic, we actually have a serious investment question.

We know today that the 1982 BusinessWeek cover “Death of Equities” turned out to be totally wrong and a great contrarian investment signal to buy equities.

We wonder whether the Fast Money chant of “Death To Buy & Hold” (after a 40%-60% decline in equity markets) will prove to be a reliable investment signal to Buy & Hold high quality stocks for the long term.

Readers might be interested to know that, according to Richard Bernstein of Merrill Lynch, during the decline on Thursday, November 13, the intra-day dividend yield on the S&P 500 (3.74%) was briefly greater than the yield the 10-Year Treasury Note (3.71%), something that has not happened since 1958. So, despite what Fast Money says, we are not in the early stages of a decline in markets. Bernstein also argues that a secular period of conservative, high quality investing might emerge from the current bear market.

When it actually emerges is any one’s guess. But wouldn’t it be deliciously ironic if the Fast Money “Death To Buy & Hold” exhortation actually ends up being a great signal to begin a Buy & Hold approach?

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