Sunday, February 26, 2006

CNBC: Fundamentals and Daytrading?

I just happened to come across a video of CNBC blurb that featured Barron's Michael Santoli and's Andy Swan talking about the recent Google decline. It's the usual CNBC tactic of stuffing a bull and a bear in the same cage and giving them a story to fight over. What's notable though is that they take Santoli's fundamental view and pit it against a daytrader's opinion, thereby forcing Andy to put on his "fundamental" hat and do his best in combatting Michael's arguments.

CNBC certainly achieves its goal of providing an entertaining show but fails miserably at educating the investor. In retrospect I find it entirely laughable: it's similar to handing a soccer player a hockey stick and throwing him on the ice. Probably just as entertaining and at the same time utterly lacking in any other value.

The above isn't meant to undermine Andy's abilities. Bet let's face it - he is a daytrader and I'll bet he is very good at picking his battles when it comes to short term directional trades. In fact, his bullish view on the stock (GOOG was trading at 344 at the time) proved to be correct (the stock is at 377 as of last Friday). Roughly ten percent up. Excellent call if you ask any trader.

So, does that mean Andy's fundamental arguments (about Google's expansion of product lines, growing ad space, etc) have proven true? Or are we to believe that Google isn't going to 250 as suggested by Santoli?

No, all this proves is that a trader is a trader is a trader. Either the folks at CNBC still don't understand or they deliberately ignore this important fact. In either case, this is just another proof that when taken seriously, the show is dangerously misleading to the investor.

TV is entertainment only, folks. CNBC is one of its best kinds.



At 4:23 PM, Blogger Andy Swan said...

Hey that's me you're talking about!

Excellent points, Dmitry. In fact, today's action pretty much sums up your entire arguement:

GOOG came out today basically saying that Santoli's analysis was correct. But in the meantime, we got a $50 run out of the stock before I issued this "take profits now" note this morning in the premarket (lucky timing never hurts).

In other words, the fundamentalist from Barrons was "right" (although stock still up from the appearance), but the trader from DaytradeTeam got the 50 points profit locked in. So now it's back to where we started....

To be fair to CNBC though, I allowed the conversation to be steered exclusively down the fundamental lane.

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