Roubini and Malpass on Kudlow

While doing my end-of-day routine tonight, CNBC on mute, I saw the familiar faces of Nouriel Roubini and David Malpass.  I backed up the TIVO so that I could watch the entire discussion.

It is good TV, I suppose, and Kudlow loved it.  At the end of the segment he observed that the two of them did not agree about anything!  And he was right.

The problem is that most viewers cannot possibly sort out any truth from this kind of discussion.  The  participants only have a short time on each answer.  The impression they make has more to do with their debating skill and sound bite preparation than the merits of their case.

The significance of this is that people are really making important financial decisions based upon these discussions.  If we were listening to two scientists debating some point about particle physics or something, we would realize that we were not qualified to decide who was right.  But when the subject is economics, people seem willing to plunge in.

I hpoe that my client Mildred was not watching this one!  Are people really affected?  Barry Ritholtz featured Roubini and attracted an honest commenter who admitted that he had lost money, following what he believed to be Roubini’s advice.  For every person like that who steps up to say what he did (and get excoriated by the Ritholtz community) there are many others who would never admit it.

I want to be clear and fair.  Both Roubini and Ritholtz have been specific in their advice, including some good trading calls, especially by Barry.  Nonetheless, these nuances are lost on many viewers.

In my role as an expert consumer of economic commentary, I have an advantage.  I have actually read extensively on the arguments of both, so I knew what they were trying to say in the time available.  To take but one example, Roubini returned repeatedly to the September employment report, a gain of only 51,000 jobs.  Malpass then had the task of trying to explain this number in the context of the BLS revisions, a subject that I covered here and again here.

It was impossible for him to do this adequately in the context of the television program.  This helps to explain why many people are caught up in the current cycle of negativity.  It may prove to be an expensive decision.

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  • Barry Ritholtz October 18, 2006  

    Hey Jeff,
    You and I post under our real names, disclose actual positions, and are very public in hwat we say and do. We are, in a word, accountable.
    That isn’t true for many of the comemntators out there. I’ve been finding some commentators are less than honest, posting under different names, and making assertions that turn out to be false. Most recently, it was a guy who had been posting bullish comments, and then made a “Gee, I lost money shorting” statement under a different name. He got found out, and was essentially asked to hit the bricks.
    A lot of that junk goes on, and it can ruin an otherwise robust discussion where people genuinely disagree but respct the debate.
    I’m not sure what happened with today’s issue; I wasted time arguing with a troll who insisted that saying BUY Qs SPYs and DIAs over the next 3 days (june 13) was somehow NOT a bullish trading call.
    As to TV, anyone who invests based on what they see on TV is a fool (See this for more: LOSE THE NEWS

  • oldprof October 19, 2006  

    As usual, Barry’s point is very well-taken. Since he has such an extensive community of followers, it is not surprising that some post deceptive comments. His approach invites comments and he encourages all comers, including those who disagree.
    Having said this, I do believe that some investors over-react to the doom-and-gloom predictions from Roubini.
    As I have said before, any individual investors should read Barry’s series on the Apprenticed Investor, including the article cited in his comment. My guess is that many professional traders and hedge fund managers would also benefit!