Write Comment August 8th, 2013 Uncategorized
For those of us who are fans of Dow Jones MarketWatch, the world’s largest financial website and a former CBS property that built a huge following with its insightful news coverage in the early dot com days and grew with fine financial reporting, Paul Farrell represents an odd type of journalist. His bylines, that come out of his home in scenic San Luis Obispo, foretell horrible market meltdowns that continually attract fearful eyeballs from investors worried about a market crash, but rarely come to fruition. His latest missive Stock roller coaster set for sickening drop, like most of his articles, plays on our fears of a market crash, yet presents little in the way of any kind of data to support his theories.
Unlike his colleagues at MarketWatch who rely on P/E ratios and technical market indicators, Farrell’s pieces start with a comparison (in this case to the Kingda Ka Rollercoaster) and end with the fear that this market may drop and may drop violently – soon. The only problem is that Farrell is only right once every few years when we hit a bear market. In point of fact, his pieces have been warning investors about the impending collapse of the market since the Dow closed below 6600 in 2009 until today when it stood near 15500. Yet Farrell’s pieces continually garner more eyeballs than the data-driven musings of fellow MarketWatch prognosticators Mark Hulbert or Herb Greenberg, who joined CNBC in 2010 after a brief stint starting a research firm.
Financial reporters are always rewarded for “moving markets” or stocks. Greenberg made his name by aggressively investigating companies that looked fishy, such as AremisSoft, where he started an investigation and the SEC eventually sued for fraud. “Moving markets” is what gets people to read. But if the goal of these financial destinations is to move markets rather than to report on facts, perhaps the public is not being served well. Barron’s notorious bear Bill Alpert once told me never to contact him with information about a company with a high P/E ratio. No wonder then, that he told investors that Tesla shares could be a sell back in June, when the shares were trading around 100. As I look at the aftermarket screen of the shares following another unexpected blowout quarter, the shares sit at 150. And Alpert’s bearishness is not confined to Tesla. He has twice gone after the biggest name in financial journalism, Jim Cramer, most famously in his 2007 cover story, Shorting Cramer, where he argued that the Mad Money host’s picks had underperformed the market.
So why is all of this interesting? It’s not really new news. Nouriel Roubini, aka Dr. Doom, has been predicting a market meltdown for more than 15 years. And he also predicted the great recession. The only problem is that he has been predicting another meltdown ever since – and it has not happened. Why do doomsayers like Roubini, or Harry Dent remain relevant? Why do people continue to believe in the musings of journalists with questionable track records? The answer may lie in our psyche. We can’t look away. We have to read about plane crashes. And our fear of the unknown makes us susceptible to reading doomsday prognostications, the same way we watch horror movies. Paul Farrell’s articles continually make the best read of MarketWatch’s pieces. And yet, his credibility and lack of supporting data should make him their worst read! Yet, his face is there in the top 5 pieces, day after day. Writing about bad news is big business. Just don’t believe the hype. If you need a dose of doomsday, try Nat Geo’s show Doomsday Preppers. Bunker not included!