These days, it seems that the concerns of many more American households are tied to the ups and downs of a volatile stock market, with a larger proportion of their personal savings invested in stock portfolios. From the professional day trader to the retired couple purchasing stocks via E*Trade, new kinds of investors continue to emerge in a market that has made so many millionaires overnight. But while successful investing requires copious market and industry information, the average investor can never know enough about a particular stock.
Many must rely on financial intelligence that typically comes from analysts, brokers, commentators and journalists. With the pervasiveness of financial reporting on the Internet and television, the media can make a stock soar or tumble in a matter of seconds by reporting rumors - some true, some bogus, some off the record.
The financial media report not only the facts and figures, but also the evaluations and predictions of analysts, the comments of CEOs and the rumors of traders, which remarkably move the market in an instant. In his new book "The Fortune Tellers: Inside Wall Street's Game of Money, Media and Manipulation," Howard Kurtz, author of the best-selling "Spin Cycle," explores the media's profound impact on the stock market. As a media insider himself, Kurtz hops on the others side of the fence to analyze his colleagues. In this chaotic and overwhelming landscape, financial journalists, he says, "make things happen instantaneously, and their impact is gauged not by subjective polls but by the starker standard of stock prices." Thanks to Kurtz's extensive research, readers are given an eye-opening look at the world of financial journalism, from print publishers such as Time magazine, The Wall Street Journal and Business Week to television shows like CNBC's "Squawk Box" to financial news Web sites like CNNfn.com and CNBC.com. Kurtz consults an astounding array of insider accounts from ordinary reporters to CEOs, and his examples are fairly recent for a book that deals with the constant movement of Wall Street.
The media world is full of people - anchors, reporters and anaylsts - who can greatly influence the stock market. But who can we trust when "the degree to which basic facts can be massaged, manipulated and hyped is truly troubling?" When David Evans, a reporter for the Bloomberg News service, filed a report for the Bloomberg financial wire on the "substantial doubt" that Xybernaut Corp., the maker of wearable computer systems, continued its losses and needed more capital, Xybernaut lost a third of its market value. One might wonder how a mere reporter had such a power to move stocks. According to Kurtz, this is largely due to the media that "mindlessly trumpet each prediction." He points out that the media wants to make people get excited about the idea of being the "Next Big Thing," making millions of dollars overnight with the influx of "tips, touts, picks and pans." Unfortunately, this might lead to the distortion of facts as news is exaggerated just to get viewers' attention.
Next, Kurtz exposes the workings of top journalists. First comes Jim Cramer, "the king of all media," who struggles to succeed in Wall Street in his four identities - columnist, television commentator, stock trader and entrepreneur. Cramer faced a nightmare of criticisms when he wrote a financial advice column for "SmartMoney" magazine, touting four small stocks of which Cramer's hedge fund owned 6 to 9 percent. The results were instant: those four stocks "took off like a rocket." He might not have done anything wrong, but that triggered Wall Street about the "conflicts of interest."
Suddenly, the manipulation of the media emerged as a controversial way to do business when everyone realizes how strongly it could affect stocks. A CEO of a new company could use a show to boost its IPO. An analyst might praise a stock that his company owns. That "incestuous relationship," as Kurtz puts it, makes it hard for consumers to pick the right information and stock analysts to give fair reports without being bound by the stock's manipulation.
Kurtz brilliantly unveils the relationship between the technical analysts and the media people through the story of "the most famous woman in financial news." Maria Bartiromo of CNBC who has gained celebrity status. Well-known for her charming looks, Bartiromo is "the first correspondent" to cover the market from the trading floor. Her interest is "getting the scoop" from her close sources to provide viewers an ahead-of-the-curve look before the market starts. Thus, she has tight alliances with investment firms like Morgan Stanley and Merrill Lynch that have thousands of brokers: They are "the ones most likely to move stock prices." Yet in the world where people are "desperately searching" for someone who knows more about stocks that everyone "will be buzzing about" tomorrow, Bartiromo's reasoning is firm: "You either have a relationship with me or you don't."
While Kurtz offers a myriad of stories, he spends little time outlining the implications for investors. By exposing the financial media, Kurtz's book implicitly advises investors to pay more attention to their sources. The media world, however, constantly exercises its impact on the newly-spawned group of stock players, and the determination to resist the "blandishment" from newsstands and television shows is not easy for everyone. As Kurtz puts it, "Those who blindly follow them have no one to blame but themselves"
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