ON MEDIA COVERAGE OF DOW HIGHS

"ARE WE THERE YET?"

It's been uncomfortable watching CNBC TV the past few days, since the Dow has been flirting with new record highs since 2000 (for the record, it was 11,722.98, reached January 14 of 2000).

Not because I don't like to see the market going up (I obviously do as an investor). 

Not because I don't like to see records being broken (it's always important to note passing milestones).

Not because I don't like to see CNBC get more viewers on the back of a more mainstream story (CNBC remains my favorite TV network during market hours).

But because the CNBC crew seems to be "partying like it's '99" in recent days, especially on it's morning shows like Squawk Box and Power Lunch. 

Too much focus is on almost tick-by-tick coverage of  that one sound-bite (Dow hitting new highs), and too little on the overall context for investors.  As a case in point, look at the top few headlines this morning off it's web-site:

Market Dispatches

Dow record in sight; RIM soars Dow comes up short on new high Dow up 20, misses record by 34 Dow hits 2nd-highest close ever Stocks up despite home price decline

That's four out of five focused on the Dow, as of 11:45 am this morning (EST), while the fifth obviously is also focused on stock market directionality.

It's a classic example of how the mainstream media has a tendency to over-does a story in it's enthusiasm to cover it, be it positive or negative.

The CNBC coverage has been particularly giddy in the types of stories the network has covered in recent days. 

An example yesterday was a "Power Lunch" feature on executives taking a 4-minute, $2000, helicopter flight, ferrying themselves from their corporate jets in Teterboro, N.J., into Manhattan's East side.  The example used had executives going to a lunch at the Four Seasons.

It's a little early for all this hoop-la, especially since the broader market averages like the S&P 500 and the Nasdaq, are far from any kind of highs reached in 2000 or any other time.

The current record environment is restricted to the Dow, which only represents 30 stocks, and is highly sensitive to big movements in individual Dow components.  As Merrill economist David Rosenberg notes in a timely piece:

"...the average Dow stock is still down 34% from the prior high and the median is down 39%. Not only that, but consider what it means to go back to levels we last saw 6-1/2-years ago – it means no net change over a span that saw the Treasury market generated a total return that exceeded 50%.

Not only that, but take inflation into account and in real terms the Dow is still 14% shy of the old record.  And since this is still just a composite of 30 stocks, call us when the broad S&P 500 reaches the milestone - it has 14% (or 188 points) to go still."

It'd be nice if CNBC focused on the broader context and perspective for a change, for the sake of it's mainstream audience.

P.S.  I'd like to thank my friend Bill  for helping coalesce the various reactions I've had to this story this week into this post.

Comments

[Yaser Anwar]

Michael,

You've hit the nail on the head. Be it CNBC or even FOX, all too focused on the Dow hitting new highs. Yes, I agree it's great pass milestones however they don't cover much of the bond market which keeps signalling the opposite of the equity market.

I don't know if you noticed but the 2-10 yr yield spread worked a bit further into inversion through the night at -8.5

Even short interest is climbing higher each day. I'm worried that as the 3rd Q earning season approaches a few earnings short fall and we will see the Dow tumble.

[Ward]

It is as though they've turned the Dow into Jon Benet Ramsey. The endless repetitive spew of irrelevant information. Maybe a tivo world will eventually make it stop.

[Yaser Anwar]

Ward,

TiVo CNBC? lol, I don't think anybody would want to watch CNBC the next day, all timely info, pretty much useless the next day. Not like it is very useful currently but a good way to gauge market sentiment.