I'm Living In The World Of Oz
First, I have to preface this post is regarding journalism and financial reality not personalities. I like Jim Cramer. He has a great wit. I'm on the fence re his positive impact on the public but but I'll give him some benefit. But, his investing acumen is highly lacking in my estimation. He's jacks or better if the market is going up. I still can't believe he ran a hedge fund. Of course, I'm not sure how much he was actually responsible for other than raising money and throwing darts at tech which would have made anyone with alot of money a whole lot more money in the 1990s. In other words, the biggest bull market in history does not equate with investing genius. Benjamin Graham, as an example, was an investing genius.
Last night I was flicking through the TV channels to hear VMWare is the next Google according to Jim Cramer. And, EMC is a great buy. I typically refrain from calling specific people out but this is absolutely absurd. It seems CNBC has returned to the paparazzi ways which cost it so much during the bear market. Sound bites and entertainment rule the day. These people are neither what I consider journalists nor financially savvy. What has happened to journalistic capability in the major news forums? Everywhere I look there are focus groups and consultants trying to mold news into a feel good experience for ratings and ad revenue. News for news sake is over in all but a few of the great news institutions. I believe that's why the internet and blogs have become so popular. One can get more serious, detailed and honest journalism from many bloggers than the major news outlets. CNBC spouts a ten second cheerleading party but a source not controlled by ad revenue or media executives on the net might tell you why that isn't necessarily so.
So? Is EMC a "buy buy buy"? VMWare the next Google? EMC is valued significantly higher than the S&P was in either the 2000 or 1929 bubble. Capital equipment spending is awful (just ask IBM in their last earnings statement), the stock is the most overbought in eight years and Cramer tells me earnings estimates are too low. Then he tells his audience a twenty year old technology is going to be the next Google. Psst Jim, virtualization, VMWare's technology, has been around since the dinosaurs. And, Microsoft is coming out with their own version that will be a tough competitor. Especially if free as many other vendor's virtualization products already are. You may have just heard about it but we already know how much you know about technology. This same person said Sun Micro was his single best idea in 2000 right before it promptly fell 95%. (A friend of mine and a mighty Trojan is a very successful executive in the financial community. He still has Cramer's report detailing his bullishness on Sun, Oracle and other tech stocks in 2000 hanging on his wall. A reminder of Wall Street insanity.)
Below is a chart of EMC and its largest global competitor, Network Appliance. If fundamentals are driving EMC whose stock, in blue, is up 100+% in a year then why is NetApps, a dominant player with excellent products and management, in red, flat over the same time frame? It's because Cramer's locust-like momentum buddies are jamming the stock for personal gain. Nothing wrong with that as long as you know what you are dealing with. I guess EMC's business is good enough to add $22 billion in market cap to the price of the stock over the last year. This company is a legacy business with slow growth and about $11 billion in annual sales. There is no fundamental reason for this price action unless someone is buying the company for $50 billion.
If you are a trader, capable of riding momentum and know how to manage a position, maybe you can play this game. That's a big maybe. But, TV viewers are investing their hard earned savings and this is going to end badly when the locusts have finished pushing.
It's pretty amazing when a friend asks me if I own stock in Crocs and he proudly tells me he bought it because Cramer recommended it. The price to book value on Crocs is 18, the price to cash flow is 50 and cash flow is headed in the wrong direction. You can already buy Crocs knockoffs for 80% less and people who have them tell me there is little difference. It's a plastic shoe for God's sake not the cure for cancer. It's valuation is higher than 99% of all publicly traded companies. This is the next Sun Micro or Travelzoo stock and has a reasonable probability of heading much further south if not zero.
This show will not be on the air at some point in the future. And, if Murdoch buys the Wall Street Journal, CNBC might not be on the air either. Bloomberg and a Wall Street Journal Channel will crowd out CNBC's paparazzi journalism. This isn't news. It's entertainment. It speaks of sellout journalism and ratings games to draw in viewership and associated ad revenue. History repeats itself and it was just a handful of years ago these facts came to pass and CNBC was teetering on the brink. A fast buck at the expense of creating long term value. Bloomberg would never have these game shows on their network.
If you get your financial advise from CNBC, good luck. Just like in 2000, you'll need it. I'm so disappointed that the weighty responsibility of investment and finance apparently isn't taken more seriously. Think I'm alone? Hardly. CNBC gets little respect from those who know better. Alan Abelson, a god of journalistic integrity and financial acumen has been very critical of CNBC as cited in the Columbia article. Columbia's school of journalism, a great institution, had this to say re CNBC in 2003. Not only has Wall Street not learned its lesson but neither has CNBC.
Last night I was flicking through the TV channels to hear VMWare is the next Google according to Jim Cramer. And, EMC is a great buy. I typically refrain from calling specific people out but this is absolutely absurd. It seems CNBC has returned to the paparazzi ways which cost it so much during the bear market. Sound bites and entertainment rule the day. These people are neither what I consider journalists nor financially savvy. What has happened to journalistic capability in the major news forums? Everywhere I look there are focus groups and consultants trying to mold news into a feel good experience for ratings and ad revenue. News for news sake is over in all but a few of the great news institutions. I believe that's why the internet and blogs have become so popular. One can get more serious, detailed and honest journalism from many bloggers than the major news outlets. CNBC spouts a ten second cheerleading party but a source not controlled by ad revenue or media executives on the net might tell you why that isn't necessarily so.
So? Is EMC a "buy buy buy"? VMWare the next Google? EMC is valued significantly higher than the S&P was in either the 2000 or 1929 bubble. Capital equipment spending is awful (just ask IBM in their last earnings statement), the stock is the most overbought in eight years and Cramer tells me earnings estimates are too low. Then he tells his audience a twenty year old technology is going to be the next Google. Psst Jim, virtualization, VMWare's technology, has been around since the dinosaurs. And, Microsoft is coming out with their own version that will be a tough competitor. Especially if free as many other vendor's virtualization products already are. You may have just heard about it but we already know how much you know about technology. This same person said Sun Micro was his single best idea in 2000 right before it promptly fell 95%. (A friend of mine and a mighty Trojan is a very successful executive in the financial community. He still has Cramer's report detailing his bullishness on Sun, Oracle and other tech stocks in 2000 hanging on his wall. A reminder of Wall Street insanity.)
Below is a chart of EMC and its largest global competitor, Network Appliance. If fundamentals are driving EMC whose stock, in blue, is up 100+% in a year then why is NetApps, a dominant player with excellent products and management, in red, flat over the same time frame? It's because Cramer's locust-like momentum buddies are jamming the stock for personal gain. Nothing wrong with that as long as you know what you are dealing with. I guess EMC's business is good enough to add $22 billion in market cap to the price of the stock over the last year. This company is a legacy business with slow growth and about $11 billion in annual sales. There is no fundamental reason for this price action unless someone is buying the company for $50 billion.
If you are a trader, capable of riding momentum and know how to manage a position, maybe you can play this game. That's a big maybe. But, TV viewers are investing their hard earned savings and this is going to end badly when the locusts have finished pushing.
It's pretty amazing when a friend asks me if I own stock in Crocs and he proudly tells me he bought it because Cramer recommended it. The price to book value on Crocs is 18, the price to cash flow is 50 and cash flow is headed in the wrong direction. You can already buy Crocs knockoffs for 80% less and people who have them tell me there is little difference. It's a plastic shoe for God's sake not the cure for cancer. It's valuation is higher than 99% of all publicly traded companies. This is the next Sun Micro or Travelzoo stock and has a reasonable probability of heading much further south if not zero.
This show will not be on the air at some point in the future. And, if Murdoch buys the Wall Street Journal, CNBC might not be on the air either. Bloomberg and a Wall Street Journal Channel will crowd out CNBC's paparazzi journalism. This isn't news. It's entertainment. It speaks of sellout journalism and ratings games to draw in viewership and associated ad revenue. History repeats itself and it was just a handful of years ago these facts came to pass and CNBC was teetering on the brink. A fast buck at the expense of creating long term value. Bloomberg would never have these game shows on their network.
If you get your financial advise from CNBC, good luck. Just like in 2000, you'll need it. I'm so disappointed that the weighty responsibility of investment and finance apparently isn't taken more seriously. Think I'm alone? Hardly. CNBC gets little respect from those who know better. Alan Abelson, a god of journalistic integrity and financial acumen has been very critical of CNBC as cited in the Columbia article. Columbia's school of journalism, a great institution, had this to say re CNBC in 2003. Not only has Wall Street not learned its lesson but neither has CNBC.
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