A Followup To The CNBC Freakout

A couple of days ago I wrote about whether or not CNBC was freaking out about ratings and what the ratings may or may not say about the sentiment of Americans toward capital markets. The original Daily News article has drawn attention from MarketWatch and Zerohedge.

The Zerohedge angle is a little more interesting. Zerohedge believes that the CNBC personalities (notably Bob Pisani and Steve Liesman) root for Fed central planning. They link to a report that shows volume going down when the Fed intervenes and so the more they root for Fed intervention the more volume will decrease so Zerohedge concludes that CNBC is unknowingly rooting for their own demise--or maybe they do realize they are rooting for their own demise, the article seems to be saying both.

Zerohedge is a very useful outlet. They are very quick to tweet any sort of news and most of it relevant. Their own content reads well and seems to understand the subject very well and they re-run a lot of useful content from other sources. That being said they appear to be overtly rooting for the end of the world. We can learn from what they write about even if we don't draw the same conclusion.

While I am not certain what the exact outcome would be from the "central planning" they wrote about in this post it is clear that the outcome would be very bad. It is not logical to think that the Fed, the media or anyone else is proactively seeking out this outcome. Stumbling into a bad outcome because of poor decisions or poor execution is a different matter.

It seems pretty clear that interest in markets was fallen precipitously. Twelve years ago day trading was very popular as were markets in general. Do you remember the first season of the show Survivor? The episode where a couple of relatives stayed with the survivors for the night and truck driver Sue Hawk asked how the Nasdaq was doing; ding.

Layer on top of that the recognition on the part of baby boomers that retirement was coming fairly soon and the interest that created followed by the disillusionment stemming from the S&P 500 being below where it was 12 years ago. Yet one more layer is the 20-somethings and 30-somethings who appear to have no faith in the stock market and depending on what you read no hope for a comfortable retirement due to poor market returns their entire adult life and a government facing fiscal threats that appear to be unprecedented.

Where too many people were interested in markets in 2000 perhaps the pendulum of excess as swung in the other direction now? Clearly a lot of people have given up (for now?) on markets because of the above and there are probably other contributing factors as well.

Hopefully I am not perceived as the cheerleader type but capital markets will continue to function. Whatever is bad about them will continue to be bad, whatever is good will continue to be good, people participating in markets will continue to succumb to emotion at the wrong time and while not all investment products are bad; scrutiny will always be required.  

Tobacco companies will continue to profitably sell cigarettes and pay out dividends. Kids in foreign countries will continue to want to emulate NBA stars and buy Nike shoes (we've owned NKE for clients since 2006) and if you take medicine you are very likely to continue taking it which is of course good for drug companies. There are countless other examples too.

What might change is the number of people who remain active in the markets. The numbers seem to be going down but that won't prevent some stocks and markets from flourishing and others from floundering. This is one element to my long running thesis about average annual returns in the US markets being less than what they used to be (this is a theme going back to the start of this site in 2004). At the same time though many foreign markets will go on without the US (another very long running theme) as has been the case over the last ten years.

A successful financial plan typically requires contributions and some amount of growth. If the growth component is removed (for choosing to avoid capital markets) then more must be contributed and this can work but market will continue to grow even if that means the US is not one of them. In that light it makes sense to spend the time learning which markets have the best chance of "normal" growth (or better than normal) and not give up.

A related personal item; yesterday we met with a couple of people with AdvisorShares who are in town for a conference. The conversation was very productive and the timeline for moving the relationship forward is in track for early July which we are thrilled with.