Befuddled CNBC anchors admit to having no clue as to what's going on. - 9-Jan-08 - Generational Dynamics

Generational Dynamics Web Log for 9-Jan-08

Befuddled CNBC anchors admit to having no clue as to what's going on.

And these guys are supposed to be experts.

Intraday Dow Industrials chart for Tuesday, January 8, 2008

Intraday Dow Industrials chart for Tuesday, January 8, 2008

Around 2:30 pm on Tuesday, the market started dropping like a stone.

The CNBC anchors were totally befuddled, though not dumbstruck.

CNBC commentator Dennis Kneale was completely stupified on Tuesday <font face=Arial size=-2>(Source: CNBC)</font>

CNBC commentator Dennis Kneale was completely stupified on Tuesday (Source: CNBC)

Here's what Dennis Kneale, CNBC's Media & Technology Editor, said at 3:08 pm, when asked why the Nasdaq index keeps falling:

"I've been looking at this and studying this and I ... I ... and so far, Maria, I can't find any more fundamental underlying scary reasons than the fact that it's been up really nicely and let's go ahead and take our profits. You look at some spending forecasts for '08. First quarter is going to be very slow; first half will be a little bit less slow; but by the end of '08, spending is going to be up considerably. One survey shows that small businesses, which is the bulk of spending in the US, 5 million companies, right? That they're going to spend an average of 5% more on IT in '08. Another survey came out and said, oh my gosh, only one quarter of companies say that their first quarter budgets are going to be higher than their fourth quarter budgets. So it's kind of mixed out there. But maybe this is just a matter of taking profit where you can. .. But what's falling apart here? Why is this market so nervous?"

He just can't figure out what's going on, can he? What's wrong with these investors? Don't they know that there's a survey that says that high-tech spending is going to up in the last quarter of 2008? Now, I ask you Dear Reader, are the investors that Dennis Kneale is criticizes all idiots, or is Dennis Kneale himself the idiot? It's hard to imagine a more airheaded answer than the one Kneale gave.

It's not hard to figure this out, and I gave the reason a couple of days ago: estimates of fourth quarter earnings have been plummeting, almost on a day to day basis.

Institutional investors all use pretty much the same method for deciding whether to buy or sell stocks. It's called the "Fed Model," and it's a fallacious but widely used investment formula derived from a single paragraph buried deep in a 1997 Federal Reserve report. The method uses a formula based on price/earnings ratios and treasury prices.

And so, with earnings estimates plummeting, P/E ratios are increasing, and so investors using the "Fed Model" are selling.

This isn't so hard to figure out, but instead we have this so-called expert saying, " I've been looking at this and studying this and I ... I ... and so far, Maria, I can't find any more fundamental underlying scary reasons...." What clowns. (9-Jan-08) Permanent Link
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Generational Dynamics Web Log for 9-Jan-08 Befuddled CNBC anchors admit to having no clue as to what's going on.

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Generational Dynamics Web Log for 9-Jan-08
Befuddled CNBC anchors admit to having no clue as to what's going on.