WATCHING THE MARKETS
September 1, 1998
Thanks to the Internet and television, the average stockholder can monitor every shift in the market. But does this abundance of financial news help investors or mislead them?
TERENCE SMITH: As the market plunged more than 500 points yesterday financial news cable networks like CNBC and shows like CNN's Moneyline were in crisis mode.
A RealAudio version of this segment is available.
September 1, 1998:
A panel of economists on how the markets' impact the economy.
August 31, 1998:
The Dow Jones Industrial Average falls 512 points.
August 27, 1998:
The Dow Jones Industrial Average drops 357 points.
August 26, 1998:
Why is the Russian market collapsing?
August 11, 1998:
One World, One Market: Is globalization good or bad for America?
August 5, 1998:
The U.S. stock market continues its roller-coaster ride.
July 31, 1998:
How is Asia's economic crisis affecting the United States.
May 28, 1998:
The Russian government tries to maintain the value of the ruble.
April 3, 1998:
The U.S. economy soars as Japan continues to fall.
February 3, 1998:
The rippling effect the Asian economic crisis.
Browse the NewsHour's coverage of economic issues and the media.
The Money magazine Web site
The New York Stock Exchange Web site.
The Nasdaq Web site.
LOU DOBBS, Moneyline: So what we're watching is tremendous pressure on a global market system.
TERENCE SMITH: For these networks bad news on Wall Street is good news. Their ratings can triple when the Dow dives. Yesterday, CNBC reached a record 1.2 million households.
SUE HERERA, CNBC anchor: A freefall on Wall Street today—
TERENCE SMITH: At the Charles Schwab brokerage office in Washington, D.C., Branch Manager William McGurn was poised this morning for a busy day. He says many more investors are watching the financial news networks and acting upon the information they receive minute by minute.
WILLIAM McGURN: There's been such an explosion of avenues for people to find out more about the market from CNN and CNN FN and all kinds of things, cable.
TERENCE SMITH: Investors like Bill Price say you've got to be careful not to get swept up in the moment, but—
BILL PRICE: They bring in top executives of companies and of mutual funds and what not and you're hearing it from the source, sources that as, you know, small individual investors we never would hear before.
TERENCE SMITH: Among the guests on the financial networks are specialists whose comments move markets, like Wall Street guru Ralph Acampora.
RALPH ACAMPORA: The evidence within the Dow suggests that the June low will not hold.
The new American sport: stock market watching.
TERENCE SMITH: Acampora has been steadily optimistic about the market for the last year, but when he turned pessimistic on CNBC on August 4th, the market dropped 160 points in the next half hour At the Washington Sports Club today there was financial news, not baseball, on the screen. And former Congressman Jimmy Hayes had money news with his lunch at Washington's Capitol Grill.
JIMMY HAYES: It's like a racing form. Racing forms always contains a complete history of every horse and probably too much information, and the odds that they use do not tell you who's going to win the race.
TERENCE SMITH: And that's the point. For some Americans, the stock market is their new favorite sport.
TERENCE SMITH: Now for more on the impact of the financial news networks on the market we're joined by Muriel Siebert, the first woman member of the New York Stock Exchange. She's the founder and president of her own national discount brokerage firm; Gary Schatsky is president of the Manhattan-based Independent Financial Counselors, he's also vice chairman of the National Association of Personal Financial Advisers; and Teresa Tritch is a senior editor at Money Magazine. Welcome to you all.
Gary Schatsky, let me ask you, you have referred to the virus that is financial news. What do you mean?
GARY SCHATSKY, Financial Planner: People from all walks of life have been infected by financial news. Wherever I turn, whether it be on vacation, walking in the street, just about everyone is talking about the markets, even when they're not going down 500 points. People have really kind of given up on coming home, putting down their bags, and spending some time watching TV generally or with their family, but, information act, they're turning to financial news.
TERENCE SMITH: Well, is it your notion that this is some sort of catnip for the small investor?
GARY SCHATSKY: It's very dangerous, particularly over the past couple of years, where the press has been driving home the point, particularly the television, that the markets are almost guarantees. When I talk to investors about risk, particularly those that watch, whether it be CNBC or CNNFN, they say, you mean, when I ask how much risk are you willing to take, their response is, you mean the chance to lose temporarily? They don't even perceive that there's an opportunity to lose permanently. And that's dangerous. The stock market is a good investment, but it's not a guarantee. And a lot of people are now putting just about everything they have in the market in large part because of the media's presentation and the way it's being built up.
TERENCE SMITH: Muriel Siebert, do your customers, when they come in, do they reflect that sort of false illusions about the market?
MURIEL SIEBERT, Stockbroker: I don't know if they have false illusions. I think they're much better informed than they used to be. The programs often bring information to them, and there is so much available on the Internet and we're finding that our older customers are getting their research on the Internet. You can get filings that are made to the FCC on Edgar at approximately the same time that the major institutions give them. So I think some of the programs are educating the people. There is a lot of hyping. We get people that appear on some of the television shows and some of the radio shows and some of the newspaper articles that are telling people to buy stocks that they may be selling for their customers.
TERENCE SMITH: Well, Teresa Tritch, let me ask you, if there's a growth industry in this country, it's financial news. Witness your magazine with a circulation of nearly two million, and the whole arrival of new magazines in the field. Is there too much of a good thing here, a glut of information, and does it—does it run that risk of misleading people?
Is more news good news?
TERESA TRITCH, Money Magazine: I think the more information the better. I think if you get your information from only one source, you may run the risk that the gentleman spoke of before of believing just one corner of the market, such as it's going up, so perhaps it will keep going up and never come down. But with the broad base of information that's available now, I think there's a better chance for the individual to be educated, to listen to what's being said, to form good questions, and not to act until those questions are answered. It's the job of the individual investor to decide which source of information they trust the most and to go with that and also to go with their own temperament, what they're comfortable doing, and not necessarily what they may feel they're being told to do by any one program.
TERENCE SMITH: Well, that raises the question, Teresa Tritch, whether or not the flow of information and opinion not only creates false expectations but actually misleads people into different conclusions.
TERESA TRITCH: I don't think that's necessarily true. Yesterday, for example, all over these networks you heard people asking what about the individual investor. Is the individual investor going to sell? Who's selling now? Is it the institutions, or the individuals? And I think just by raising that question you raise the question in individuals' mind what is the right thing to be doing right now. They're not necessarily dispensing advice; they're dispensing information. And, like I said before, once you have a couple of sources of information that you can trust, you know how to interpret that information. I think, on balance, it's to the good.
TERENCE SMITH: Gary Schatsky, does the flow of information that we're talking about—this 24-hour minute-to-minute information—have a measurable impact on the market, as far as you can tell?
The problem of trying to make financial news sexy.
GARY SCHATSKY: Absolutely. It does. It has an impact, as you had exhibited, with Ralph Acampora's comments, and what happened to the market, and every time something is said, whether it be about the market in general or individual stocks, you can see movements in the market. Without question, additional information is extremely helpful and more information is better. But one of the problems, particularly when you're talking about television and the media generally, is you have to make it somewhat sexy. You've got to make it so that the public is interested in it. If you were talking doomsday all the time, or saying that, you know, the markets could perhaps do nothing for years at a time, viewership will drop dramatically. And the same is the case with the brokerage industry. Can you imagine if every broker started talking only about the down side of the market? Well, they get paid to sell stocks, not necessarily advice.
TERENCE SMITH: Muriel Siebert, the need to fill 24 hours of news, financial news in some of these networks, does that generate either a false excitement, or an emotionalism that you think possibly hinders investors?
MURIEL SIEBERT: Well, I don't know how much they're watching. I think the news does encourage investors. I think it makes them much more sensitive to what's going on in the world. I know for myself I usually get up at 5 o'clock, and I will watch what's going on in Asia then, because the Asian market is trading then, or it's just finished. But I think that the public has really latched onto the availability of information, and the news programs were at times you get people and they hype and they hype them terribly. It does make people aware of what's going on in the world. And the fact that we are inter-related and inter-dependent. You know, we have a global economy now. And the 24-hours a day is a result of that.
TERENCE SMITH: Teresa Tritch, is there a temptation on the part of the investor to place too much faith in some of the gurus that do get a lot of attention on these networks?
TERESA TRITCH: I don't think that the individual investor is really in that much danger. Like I said before, I think the more information, the better. I think it is important that people don't become addicted to the pace of these television shows. They are very fast paced, and that's not the way you should be with your investments. You should be very methodical with your investments, so they have to be able to separate the entertainment value and the hype value on these programs from the real information. But once they can do that—and I think by and large it seems that individual investors do a good job separating the hype from the information, and once they do that, I think they benefit from having these experts speaking directly to them.
TERENCE SMITH: Gary Schatsky, do you think the line is clearly and successfully drawn between information and opinion?
GARY SCHATSKY: Unfortunately, no. You know, I'm constantly having clients, some of which are extremely affluent and others are average Americans coming to me and saying they've advised us to buy, or they've advised us to sell. What do you think? And they see a lot of the television programs, in particular, and to a lesser extent some of the print media as really an advisory service, and some people are having difficulty with it. Are investors, overall, better off because of all this information? I think, yes. But the risk is very high, particularly when people are getting emotionally vested in the markets and in the programming on a moment by moment basis.
TERENCE SMITH: Muriel Siebert, is it appropriate, in your view, for these broadcasts and for some of the specialists who appear on them to recommend specific stocks?
MURIEL SIEBERT: I think if they recommend specific stocks, they should state whether or not they are buying or selling that stock the day that they are recommending it.
TERENCE SMITH: You mean, they, themselves?
MURIEL SIEBERT: Yes, or for their clients. If they're running money, if they're money managers, they should state do they have a position in the stock, and are they selling it, or are they buying it, so that, therefore, we would get a better balance, we would get a little more accuracy.
TERENCE SMITH: Well, that goes to the argument of full disclosure. Teresa Tritch, would you have any difficulty with that sort of picking of stocks, recommending of stocks? Some actually have a sort of pick of the day feature.
TERESA TRITCH: I think the most dangerous aspect of these programs is the stock picking aspect. There's no way that anybody can come up with a stock of the day, or the stock of the week, day in and day out, and week in and week out. That's not the way that prudent stock picking is done. So that would be the area I think of biggest caution. But when you talk about are people understanding what's affecting the market, whether it's a fundamental feature, or whether it's something outside the market that's just having an effect and really getting a sense of what moves the market, what a real bear is, what a real bull market is, that's where I think the value of these programs lie.
TERENCE SMITH: Gary Schatsky, when you're talking to your clients, people you advise, what's their attitude, after listening to all this and taking it all in over the last two very rocky days?
GARY SCHATSKY: They're anxious. They're anxious, even though they've probably been—and I've discussed with them the risks of the market—because as a fee-only financial adviser, my goal is to ascertain risk and to talk about how much are you prepared to lose. That's an expression and a question that most people are not used to hearing. You know, normally the concept is: How much do you want to make, which of course, the answer is, there's no limit. So they're anxious, they're nervous, and obviously, like many financial advisers, I'm saying to them if you have a diversified portfolio, we're looking for the long-term, and as long as you're not day trading, these market gyrations won't be impacting you in the short fall.
TERENCE SMITH: All right. Thanks to all three of you. Obviously, the bulls and the bears are probably still to be heard from, maybe before this week is out. Thank you.