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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Why CNBC Is Hazardous to Your Financial Health!

Stock-Markets / Mainstream Media Mar 25, 2015 - 05:08 PM GMT

By: Money_Morning

Stock-Markets

Michael E. Lewitt writes: If you want to lose all of your money, you could do worse than tune in to CNBC on a regular basis.

The network is a cheerleader for an overvalued stock market and the Federal Reserve policies that have pumped it up – and which are steering the economy straight into another recession.


Seven years after the financial crisis ripped across the globe, the world is mired in debt. This is particularly worrying since the "Debt Supercycle" that began 30 years ago is now supported only by the largesse of increasingly shaky central banks.

Today the world is buried in more than $100 trillion of debt. Hanging over that is another roughly $700 trillion of derivatives. Is it any wonder many economies can't grow when they have to service all of that debt and face such systemic risk?

Of course, the cheerleaders on CNBC have absolutely no clue about what is going on… and the dangers of this ignorance are too important to ignore.

Yes, there are some thoughtful, experienced journalists working at CNBC like David Faber and Steve Liesman – whose pained expression when enduring his colleagues' hyperbole tells a story in itself. And Rick Santelli continues to point to the dangers of what the Fed is doing.

Unfortunately much of the substance of Mr. Santelli's excellent reporting gets lost in his proclivity for ranting rather than reporting. But much of the rest of the staff just engages in mindless cheerleading of the markets or soft-pedaling questioning of equally clueless guests.

The "Pundits" Have No Clothes

On March 18, the Federal Reserve finally admitted that the U.S. economy is in trouble.

That hardly came as news to me. I've been warning for months that economic growth is a mirage. Everybody gets excited about the fact that the unemployment rate is dropping, but there are still millions of people who can't find work and many of those who are employed aren't being paid very well.

Other than jobs data, nearly every other economic release has been negative in 2015. And believe me, it's not just because the weather in the northeast has been cold.

Six years after the low point of the crisis – when the S&P 500 hit its bottom in March 2009 – the ability of the global economy to service its $100 trillion debt load is being called into question.
In fact, the only reason financial markets are not already in deeper crisis is that interest rates have been lowered to zero by the world's major central banks.

If you don't have to pay anything to borrow money, you don't have to worry about servicing your debts. And that's the situation the world's over-indebted countries and corporations find themselves in today.

It's a vicious and highly dangerous fiscal circle, and the end is not going to be pretty.

And that's one of the reasons the Federal Reserve is scared to death to raise interest rates by even a quarter of a point.

That worries me because a lot of people think everyone who works at the financial networks is a financial expert, and what they have to say is both studied and has a level of gravitas associated with experience.

And that's just nonsense…

Because most of them are no such thing and have no such expertise.

They are just reporters – they are merely describing what they are seeing. If the market goes up, they think the economy is healthy. If the market goes down, they get serious looks on their faces and start thinking the economy is in trouble – or worse, claim that it's a buying opportunity.

In fact, they have no clue what is going on because they are merely paid actors. In England, they are called newsreaders for a reason. They read the news. They don't make it and they don't analyze it.

Unfortunately, CNBC anchors speak with authority about things that they know nothing about. And when they do so, and try to provide insights, the results are not only misguided, but dangerous…

While Janet Yellen Plays "The Met" the Economy Burns

Their reporting reaches particularly irresponsible proportions in the aftermath of Fed meetings.

After all, the Fed itself is making things up as it goes along. It has a terrible forecasting record and has steered the economy from one crisis into another. It missed the housing crisis and is now creating another bubble in stocks and bonds, by leaving interest rates at zero long after economic conditions warranted it.

But rather than take an objective stance as one would expect of an organization that considers itself an objective reporter of news, most of CNBC's reporters acted like cheerleaders for the Fed and for the stock market. I am hardly the first observer to point this out.

After the Fed issued a confusing but ultimately dovish announcement suggesting that it may not raise interest rates in June as feared, CNBC reporter Bob Pisani praised the Fed for a "brilliant performance" that managed to create both a stock and bond market rally.

You would think Janet Yellen was singing mezzo at the Metropolitan Opera!

Somebody needs to inform Pisani that it isn't the job of the Federal Reserve to engineer market rallies. And that the Fed isn't supposed to be in the performance business. If the Fed is kowtowing to the markets, it should be criticized, not praised. As the extremely effective and longest-serving Fed chairman William McChesney Martin once said, it's the Fed's job to take away the punch bowl just as the party gets started. The Fed is supposed to be in the business of promoting financial stability. But lately, it's been promoting financial instability. But don't try explaining that to the talking heads on CNBC. They've been totally captured by the people they cover.

Reporters used to pretend to be objective. That is what gave giants like Edward R. Murrow and Walter Cronkite gravitas. Now we have cheerleaders judging Fed Chairs on style points. Soon they will be commenting on Janet Yellen's hair style and her wardrobe.

Here are the facts that CNBC should be reporting:

The Fed has bought about four trillion dollars of bonds to support the economy.

It has extended untold trillions of indirect support to banks and the rich in the form of zero interest rates, which has acted as a grievous tax on millions of middle class savers, who are now unable to fund their retirements except by taking on significant risks.

And after all that, the economy still stinks.

And if the economy stinks, the last thing you want to be doing is celebrating a market rally as Pisani and the rest of the CNBC cheerleaders were doing…

Because even if the rally goes on for a while, stocks are going to correct (or worse – enter a bear market). They are overvalued and living on borrowed time. The economy is headed for a recession engineered by a feckless Fed.

There is a reason that CNBC's ratings have been at all-time lows. People don't like to lose money, and watching CNBC is a good way to do that. There are a number of fine reporters who understand markets at CNBC. But if the number one channel for business wants to be taken more seriously, it really needs to pick up its game.

Source :http://moneymorning.com/2015/03/25/cnbc-is-hazardous-to-your-financial-health/

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