March 8, 2009

The Slow Demise of Fact

It used to be widely assumed that Bloomberg News was considered to be the absolute worst of all news, But I’ve found that in many respects the news that we see on television, whether on CNBC or other affiliates of the networks and their various partnership incarnations, is so competitive in “trying to outsmart” one another to deliver the excitement and emotional thrill that really gets viewers squirming in their seats that they are ignoring what I always considered a preeminent fact of the news business, which is revealing the news, not ranting opinion. In many respects I see more and more evidence of thoughtless judgmental puppet heads parading as newscasters with the glamour and appeal of celebrities feeling more like Perez Hilton then CNN. I’d like to think that the news we get from our investment community is managed with the same view to consistency and discipline as it is to its intended impact. While it has always been customary for “fact checkers” to be used to determine the validity of a fact, in realty they only reveal the truth of whether the person assigned to have said something interesting actually said it. The news we get is so inundated with rumor and judgmental bias that I wonder where all the fact checkers are and the only conclusion I arrive at is they probably all got fired.

In business there is a practice called full disclosure which refers to the disclosure by a public company that all relevant financial and operating information must be made available through equal access. Simply put, Wall Street stock research analysts no longer sleep in parking lots to catch an important board member on his or her way to the gym, in order to solicit an undistributed piece of information. Personally, I’ve not noticed an elevation in the integrity of the promise. I also take issue with the myriad of ways in which companies can report their financial information while being faithful to the idea of full disclosure. That information can be in the form of reported earnings, or operating earnings, with or without a myriad of add-ons (EPS before XO items, w/o interest and taxes) or takeaways (after XO item and w/o interest and taxes), you get the idea. It strikes at the heart of credibility since I see the practice as not different from that of painting by number with a prescribed set of colors. However well intentioned it may be, all it leaves open is room for “street professionals” to convince us we can’t do without them. Even then only the obligations of a company can reflect those elements credibly. Good companies have everything to do with the value of their product, the poise of their management team and the worthiness of their cash flow disbursements.

"You can get more information on a golf outing than from Wall Street"

Any ratty old start-up can raise equity since there’s never a shortage of knucklehead investors willing to throw away money and potential stock riches. Profit what profit? It all is pretty meaningless from my standpoint which is why I love using technical analysis. For the heat it gets there is one undeniable fact, it is disciplined, it is grounded in math and the interpretations its open to are always view separately from it concrete results. This makes for a vibrant community of followers who speak a common language. If your broker, or advisor or very smart next door neighbor is using all the methods of analysis and simply relies on what the media and the street hand out, get out of there quick.

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