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When All Else Fails, Re-Invent The Economics

I know CNBC has the reputation of being a cheerleader for stocks, but really now. The following appeared on the CNBC website this morning:

U.S. crude oil inventories fell much more than expected last week, keeping downward pressure on already weak oil prices.

Crude inventories fell by 1.6 million barrels for the week ended July 19, the Energy Information Administration reported… On average, analysts were predicting crude inventories to have fallen by 700,000 barrels.

So, when did declining supply ever put “downward pressure” on the price of oil, or any other commodity?

To be fair, I can’t directly fault CNBC for this. Their source for the material was Reuters.

Probably just a typo then, right. Right?

Source:

“Oil Hovers Near $126 after Big Drop in Crude Inventories”
CNBC/Reuters, July 23, 2008

Roubini Tells CNBC ‘Worst Is Ahead Of Us’

Earlier this morning, CNBC’s Carl Quintanilla and Becky Quick talked to Nouriel Roubini, a former Treasury Department director under the Clinton administration and head of Roubini Global Economics in New York. His economic outlook: bleak.

According to Roubini, while a number of economists are calling for a mild, short recession in the United States, if at all, he sees a much more severe and protracted event lasting up to 6 quarters. He attributes this to the following:

• Worst housing recession since the Great Depression is getting worse
• U.S. consumer is “shopped-out, saving less, and on the ropes”
• Financial crisis that goes well beyond subprime

In effect, this will be no short and shallow recession. In fact, the NYU economics professor told CNBC viewers:

The worst is ahead of us rather than behind us.

You can access the 4 minute 25 second interview on the CNBC website here.

Source:

“Alphabet Soup Of Recession”
CNBC, April 25, 2008

Recommended Reading

I recently came across an article in the Financial Times (UK) by Mark Sellers, a former equities strategist at Morningstar who manages a hedge fund, Sellers Capital, in Chicago. His piece, “Take financial talking-heads with a grain of salt,” is superb. Sellers began:

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.

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…

You can read the rest of this excellent article on the Financial Times website here.

Source:

“Take financial talking-heads with a grain of salt”
Mark Sellers
Financial Times (UK), April 5, 2008

Is TOUT-TV Back?

Back on September 24, I noted that every now and then I come across allegations that CNBC is guilty of being a “cheerleader” for stocks and bonds. As I said earlier in the fall, I’ve always been suspect of business news channel programming due to the presence of network sponsors whose bottom lines depend on rosy economic news and bullish investment commentary. Turn on any of the business channels during the day and you’ll see tons of commercials for the financial services industry. Too much bad news, too little interest in buying financial products, and sponsors may make waves.

Anyway, when I woke up Monday morning, the first thing I did was turn on the satellite TV to see what was going on in the business world. The ticker showed that commodities were getting hammered. Not too surprising, as I expected there may be a correction, possibly a big one. However, I became a little disturbed when I turned on CNBC’s “Squawk On The Street.” As usual, Mark Haines and Erin Burnett were broadcasting from the New York Stock Exchange that morning. The two anchors noted that gold and oil were getting hit pretty hard. Fair enough. My problem was with the way they smiled as they reported it. Mark Haines also rubbed in that speculators trying to ride the trend Friday probably weren’t enjoying life too much that Monday morning. I don’t know about you, but I don’t recall CNBC anchors ever being so smug when stocks and bonds suffer the same fate. By the way, gold and oil are climbing higher as I type this.

What do you think? Is TOUT-TV back? Or did it never go away?