Do Financial Broadcasters Have a Hidden Agenda?

Given how incredibly negative some financial broadcasters have been, I wondered how they invest their own money. Getting answers wasn't easy. Most media outlets weren't particularly forthcoming on the topic and in the case of CNBC, refused to return phone calls and answer any questions.

Most media outlets do not allow journalists covering the financial markets to invest in the stocks of individual companies. Typical is the policy of Bloomberg whose spokesperson said that their journalists may not buy or sell stocks or other instruments in companies in an industry that they cover.

Fox News, which is owned by News Corporation, the same parent that owns Dow Jones, the Wall Street Journal and Marketwatch, has a policy which is restrictive in a different way. Fox journalists may invest in securities but must hold them for at least six months to discourage short-term trading based on current news. Also, they aren't allowed to invest in derivatives or options which are vehicles providing highly leveraged returns.

While CNBC wouldn't return calls seeking comment, former employees tell me that they have a blanket prohibition on investing in individual stocks (except GE, parent company of the network). Also, investing program host Jim Cramer, apparently was granted various exceptions to the CNBC trading rules.

Cramer has caused past problems for the network with his trading. In the book, Trading with the Enemy, author Nicholas Maier, who used to work for Cramer at his hedge fund, alleges that Cramer engaged in questionable trading practices including front running in the 1990s while still at his hedge fund. While making appearances as a guest on CNBC, Maier alleges that Cramer provided fodder to CNBC interviewers including Maria Bartiromo in such a way that it would benefit his position in stocks. He did this without disclosing his hedge fund's position in those stocks.

During the severe market decline this fall, some prominent financial reporters have been highlighting the worst news and hyping it. I wonder if they simply do this because it attracts some viewers. I also wonder how some of these folks invest their own money and whether they don't invest in stocks or perhaps even short stocks so they only profit if the market falls.

At one major media outlet where I spoke with a representative off the record, it was interesting to hear that some people he worked with had moved more into cash during the market decline. As I've counseled before, this is the reverse of what is smart to do. As stocks slide lower in a bear market, it makes sense to move money into stocks to take advantage of the low prices.

A former long-term Wall Street Journal reporter made an interesting point that many of the Journal's writers who were, "...writing about sophisticated instruments or big company dealings didn't have a clue about how to invest their 401k...it was kind of flabbergasting ...some had everything in a money market or stable value fund or all in one just stock fund like Magellan." Keep this in mind the next time you're tempted to make financial moves based upon what the financial media is telling you.