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Reliable Sources

Are the Financial Media Taking Viewers on a Wild Market Ride?

Aired September 16, 2000 - 6:30 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

HOWARD KURTZ, CO-HOST: The fortune tellers: Are the financial media taking us on a wild market ride? Should television be holding all those Wall Street experts accountable? And are business reporters passing on too much rumor, hype, and misinformation?

Welcome to RELIABLE SOURCES, where we turn a critical lens on the media. I'm Howard Kurtz along with Bernard Kalb.

We're going to turn the tables here today because I find myself in some controversy thanks to my just published book "The Fortune Tellers."

We're going to give some of the characters in the book a chance to fire back at me and challenge what I describe as Wall Street's world of money, media, and manipulation.

First, some background.

(BEGIN VIDEOTAPE)

KURTZ (voice-over): Real-time financial news has never been hotter, both when the market is going up and down. And everyone it seems has an opinion.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Johnson and Johnson you like.

JOHN MANLEY, SALOMON SMITH BARNEY: It's a high quality growth company trading at a very slight premium to the market.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BOB GABELE, DIRECTOR OF INSIDER RESEARCH: Viewers, keep an eye out for any more potential action in Worldcom.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

KEVIN GOOLEY, S&P PERSONALWEALTH.COM: One of the stocks you like is Comcast. (END VIDEO CLIP)

KURTZ: The not-so-subliminal message, watch our show, get rich. But some of these fortune tellers are just passing on street chatter. eBay and Yahoo! in talks about a partnership or merger, said CNBC -- never happened.

"Merrill Lynch Open to a Deal with Chase Manhattan," said "The Wall Street Journal." We're still waiting.

AOL may be a takeover target for AT&T, says "Business Week." Never mind.

And most journalists fail to press Wall Street analysts on their firms' investment banking ties to the very companies whose stock they are evaluating, or to point out how often the analysts are wrong.

Merrill Lynch's Henry Blodgett recommended eToys, which proceeded to drop by 95 percent. No matter. By then, the press had moved on to the next hot forecast.

With so much money at stake, the intense competition to be first produced a huge embarrassment when Bloomberg News, Dow Jones, and others fell for a fake press release about the company Emulex that knocked its stock down 60 percent in just 15 minutes. In that case, CNBC's David Faber and Joe Kiernan were among the few who held off on the fishy looking release.

Last week, however, CNBC reported unconfirmed rumors that Microsoft had settled its antitrust suit only to say shortly afterwards that the company was denying it.

So this question, in an age of instant information, are the media just contributing to the nonstop noise on Wall Street?

(END VIDEOTAPE)

KURTZ: Well, joining us now, Jim Cramer, Wall Street trader and media commentator who is also the cofounder of TheStreet.com. David Faber, the market reporter for CNBC and a host of the program "Squawk Box." And Terry Keenan, a senior reporter for CNN's "MONEYLINE" and the co-anchor of the programs "MONEYWEEK" and "STREET SWEEP."

Well, you'll have a chance to put me on the hot seat in just a few moments. But let me start with you, Jim Cramer. You're on a kind of a shaky tightrope as somebody who trades stocks, talks about stocks, writes about stocks.

When AOL bought Time Warner, CNN's parent, you bought a lot of AOL stock. You lost a fair amount of money. And you wrote about it. Why wouldn't that make people say, gee, why should I listen to this guy?

JIM CRAMER, THESTREET.COM: Because I've compounded 24 percent netable fees for the past 14 years.

KURTZ: But yet you talk about your mistakes. And does that sometimes put you in a delicate situation?

CRAMER: Because I'm human. I think we're turning the tables on you, Howard. You know, I read the book. The book says, well, listen, Cramer is morally ambiguous. The press doesn't work hard enough on these issues in disclosing these conflicts.

I'm with David Faber, the guy who's in the book. He is probably the most vocal about disclosing these contexts.

I let you in my office for two years. And you didn't come back with the goods, Howard. You didn't get any of the journalists who blew it. You just got the good ones.

KURTZ: All right, I'll come back and answer that in a moment.

But David Faber, let me turn to you. Let me first say that I think CNBC on balance does a pretty good job and has built a pretty solid franchise.

DAVID FABER, MARKETS REPORTER, CNBC: Thank you.

KURTZ: But you, like a lot of financial journalists, often find yourself talking on the air about rumors. You often say these are unconfirmed reports that a couple of companies may be in merger talks, or that such and such a company may be looking at a bad quarter.

Why, as you well know, a lot of these rumors don't materialize. Why use your giant megaphone to report these rumors in the first place?

FABER: Well, first of all, Howard, in the intro you actually used the term that I never used, which is unconfirmed rumors. That's one you'll never actually hear me say. There's no such thing.

However, as you well know and as Jim knows, rumors are the lifeblood of Wall Street. If we are not informing people of what is moving a stock, then we're not doing our job.

Now as a reporter, when you're breaking a story -- and of course that ultimately is what I'm always trying to do -- you try and do so in a factual manner. You try and tell people, this is what is happening.

However, if you're in a position where you know why a stock is up even though you're not sure if it's true at that point, at what point do you decide to tell people? The stock is up 10 percent...

KURTZ: Doesn't that make you nervous? Doesn't that make you feel conflicted, making that decision about whether to go on the air with something you know is not necessarily factual?

FABER: Well, I try very hard to make sure it is factual or to knock it down. That's what you try to do as a reporter.

But no, I don't feel that uncomfortable when I go on and I know specifically this is the reason. And I typically do try and put things in context. You have to remember that. You just don't send it out there in the vacuum.

You say, this is the rumor. This is why it would make sense. This is why it wouldn't. However, right now I haven't been able to confirm the fact whether it is the truth. Hopefully, I'll come back and do that.

BERNARD KALB, CO-HOST: David, I want to switch to Terry for a moment. But I know that I could do a lot of surgery on some of your observations.

Look, in a booming economy, everybody wants to be a wannabe millionaire straight away. But Terry, you report from the floor -- not because you're CNN and I'm doing this softly with you -- but you report from the floor there's a greater deal of what is happening in a factual way.

Jim and David often to me, and I listen to them, and as a matter of fact, I've been a -- how shall I put it -- a stampeded listener of theirs and have lost some money from listening to them -- isn't there a great difference when you report something aside from the oracles that we've been listening to just now?

TERRY KEENAN, CNN FINANCIAL NEWS: No, actually, Bernie...

KALB: Are you an oracle too?

KEENAN: ... I hope so. But I try to when I can. But you know, I think it doesn't matter whether you're in a news room as David is here at the exchange or on the trading floor. The market is the best reporter there is. And if the market is telling you that something is going on with a stock, you'd better snoop around if you're doing your job to find out why that stock is moving because thousands of investors are moving in or out of a stock for a certain reason.

KALB: Would you run with a rumor while you're snooping around? If you don't have the story solid, would you run with a rumor?

KEENAN: No. If I could shed light though on the voracity of that rumor and a stock was moving on a rumor that in the chat room or Jim might know about on the trading floor and everyone else knows on the trading floors all over Wall Street, I think it's only fair to the viewer to let them in on what the rest of the Street and the big money knows so the little guy has a level playing field.

KURTZ: Jim Cramer, I've sat in your office, as you know, to report in this book. And I've watched you make trades based on something that Maria Battalomo (ph), for example, the Money Honey coming on CNBC and saying that Merrill Lynch was going to upgrade a certain stock.

That stock goes up. You make a quick profit. The stock often -- or sometimes I should say -- goes down after the excitement has faded. How does that square with what I think is your view -- and correct me if I'm wrong -- that a lot of analysts are kind of cheerleaders for stocks?

And what should people think? Should people listen to these folks?

CRAMER: I think that the greatest conflict on Wall Street comes from the fact that most of the analysts are working for firms that do a tremendous amount of investment banking business. This is a constant.

These people pass themselves off as impartial. They are anything but.

I would not trust a film critic who works for Universal. Why should I trust an investment bank that has an analyst who's really working hand in hand with corporate finance to a lot of bad dot-com deals?

KURTZ: And does journalism let these people off the hook by not pointing out these conflicts?

CRAMER: I think that far too often they do. I did feel in your book that the guys who don't are Hanes, Kiernan, and Faber. And yet they dominate in the book. And I thought that was unfair.

KALB: David, do you make sure that when you invite a guest, a financial guest, that you have sort of his credentials, that is to say what he particularly owns, what he's pushing, what he's advocating, what he's selling? Or do you let him go wild? I've seen -- I have the feeling sometimes I've seen all types on the show.

FABER: At CNBC, they actually have a fairly strict policy in terms of what people can disclose or what they have to disclose to us in terms of what they own, and that they have to say on our air what they do own when they're in fact talking about a stock, or even if they're short a stock when they may be speaking negatively about it.

So yeah, there is a disclosure policy. We do vet our guests fairly well I think. And we don't just let anybody on.

I am not always involved with the guest booking policy. There are 16 hours of programming that go on every day. But I can tell you we have a pretty well thought out process in place to make sure that people don't come on our air that we don't know exactly what it is they own...

KALB: David...

FABER: ... and what they're probably going to talk about.

KALB: ... a small interruption. Do you invite people back who've made some calls that have turned out to be disasters?

FABER: Yeah, we do. We invite them back on our show...

KALB: On what basis? Isn't there a kind of an accountability at work?

FABER: ... There is...

KALB: (INAUDIBLE) bad track record for predictions, rolling the dice as it were, you still would invite them back?

FABER: ... Well, you know, predictions. I mean, what you're talking about here usually are people who are money managers. And the numbers speak for themselves.

We would invite them back if they'd been wrong. Why wouldn't we? If in fact we do take them to task, which we often do, especially on our morning show "Squawk Box." We have people who come on regularly and regularly may have been wrong. But we will discuss it with them.

You know, there's nothing wrong with getting a sense of things. You need to understand the landscape. You can't always hear from just one side. You want to get both sides in the picture.

KURTZ: David, let me break in here because I want to ask...

FABER: You want thought provoking ideas.

KURTZ: Terry Keenan, if Wall Street analysts, if 99.5 percent of their recommendations are to buy, buy, buy stocks, by the time an analyst tells you to sell stock, it's probably already heading for the toilet. What do they get so much air time on CNN and on the other financial networks?

KEENAN: Well, you know, Howie, I think frankly in your book you underestimate the intelligence of the business news viewer, by all accounts the most educated and wealthy television viewers out there. And they know a lot about the stocks that they invest in.

And I think that they know that it's the job of these analysts to sell stocks much as it's been your job the last couple of weeks to go out and sell your book on various talk shows. And I think they take that into account when making their decision.

But this research is highly valued on Wall Street. A lot of big clients pay a lot of money for it. And if the small investor can get it for free through the help of CNNFN and CNBC, so be it.

KURTZ: I'll take your point, and I'll plead guilty to try to sell a book.

When we come back, we'll continue our discussion and our guests will have a chance to fire some questions in this direction.

(COMMERCIAL BREAK)

KURTZ: Welcome back to RELIABLE SOURCES.

We're talking with three guests from New York, all of whom happen to be in my book "The Fortune Tellers." And here is a chance for them to take on the book.

Jim Cramer, the ball is in your court.

CRAMER: All right, Howard. Which would you prefer? Would you prefer a journalist who knows nothing but is totally untainted telling you blather about stocks? Or would you prefer me, who has a decent record and puts his money where his mouth is, telling people what I think they should do?

KURTZ: In other words, enough about me, let's talk about you. OK. I actually have defended you, Jim Cramer, because I think that you make a great effort to disclose what stocks you have when you talk about stocks.

But I also think that it creates all kinds of issues of perception, fairly or unfairly. You've gotten knocked around a bit, and you have a pretty thick skin.

And so I also think there's a very valuable place for journalists who don't engage in short-term trading who I can look to as a relatively objective source of information on stocks.

CRAMER: But Howard, if you can't get it another way, do you think that what we're doing at TheStreet.com doesn't help the investor because we're conflicted because we own some of the stocks that we talk about?

KURTZ: I think TheStreet.com is a very valuable Web site. And I think you are a very provocative columnist. But I also think that, you know, as you would be the first to admit, you've gotten into some trouble sometimes through no fault of your own, when questions have been raised about stocks that you own that you talk about.

For example, I did think it was a misstep on your part -- and then we'll move on to some other folks -- when you had TheStreet.com show on Fox News Channel, which has since been taken off the air in a dispute between the two parties, for you to say -- to predict a rebound in TheStreet.com stock, not because it didn't rebound, but because so clearly that was something you had a financial interest in.

CRAMER: We disclosed. I defer to my others (ph).

KURTZ: David Faber. Howie, I've listened to you as you've made appearances of course in the last couple of weeks to sell the book.

And when you're talking about our profession -- and by that, I mean journalism -- you're saying a number of salacious things. You seem to be indicting us to a certain extent in a way that you didn't in the book and make conclusions that I didn't see you coming to in the book. I thought in a very significant way the journalists that you focused on in the book come out as fairly responsible people who at the very least are always trying to get it right.

So I'm curious, are you just trying to sell books by saying these things publicly even though you don't say them in your book? Or did you believe them but you weren't able to prove them?

KURTZ: Well, I think that what I've been saying about the book is consistent with what I write in the book given the limitations of five minute interviews on television versus a 350-page book. For example -- and let me just say this -- I agree with you, with all of you in fact, that the journalists involved here and just about everybody I wrote about with a couple of exceptions, are trying to do the right thing in the sense that grappling with questions about getting stories nailed down, although it didn't work very well in the case of Emulex and the bogus press release there.

You, David Faber, were one of the exceptions. In terms of not just feeding into the rumor mill and in terms of worrying about the hidden agendas of the people who feed journalists information.

But I also think that in any other part of the news business, if I were to report a rumor about Al Gore or George W. Bush and I couldn't nail it down, I'd get my head taken off. And yet it seems to be OK because of the unique situation in which financial journalists find themselves because they do have a real-time undeniable impact on the market.

FABER: I think that's true. I think that's the right point. And that's the central point. There is in fact a market that is always moving, that is moving on things that aren't true.

We all would love to knock down every single rumor. If I could, I would. And very oftentimes, I don't actually do the story.

Jim and I were talking during the break. AT&T this week, there was a rumor that Michael Armstrong (ph) was going to be replaced by John Mallone (ph). I heard it before anybody. I heard it last week in fact. I was fairly certain it wasn't true. I wouldn't go on the air with it until ultimately I knew it wasn't true.

So that is an example of trying to do the right thing. And that's typically the way most people approach the job.

KALB: David, but why can't you get in the way of a stampede of rumors? That's a fair question. You know, caveat emptor -- well, I'm an emptor, a person who has bought stocks without enough caveat by listening to you, and particularly listening to Jim with TheStreet.com.

When I read the book, you made, what, a couple of hundred million dollars on Street.com? I lost four or five figures on that listening to your advocacy?

CRAMER: I've never made a dime on TheStreet.com (INAUDIBLE)...

KALB: Well, your stocks were worth that in any case. The question of rumor is critical because you began a moment ago, Jim, saying would you like an objective journalist rather than somebody who knows about stock? It is possible for an objective journalist to know about stock and not come in any area of a conflict of interest. That's quite possible, isn't it?

FABER: Yeah, that's me every day all day long.

CRAMER: I do think that periodically through the book you find over and over again this theory which is that it's really dangerous to talk to people and listen to people who have money in the market who are talking because they don't know anything. And I resent that. I think that's wrong.

There's a lot of people who I listen to on "Squawk Box" and other shows that I learn from and that I can make money from. And I make money from watching TV. And you can at home too.

It's not that hard. And the readers and the viewers are much smarter than you think they are, Howard.

KURTZ: Well, that may be true in some cases. I think that journalism fails in a very fundamental way when it doesn't provide a score card -- and some of you do, and some other programs don't -- to tell us about the people, the prognosticators, the experts who come on the air every day and issue that kind of wisdom.

Sometimes it turns out that they are wrong or that their picks don't pan out. And I think that in any other field, there would be a little better job of holding them accountable. I don't think we disagree on that point.

But let me get Terry...

KALB: Terry.

KEENAN: I disagree a bit because I watch a lot of political shows on TV, cable, and broadcast. And there is speculation upon speculation every weekend about who's going to be the vice presidential candidate and the like, what Clinton is going to do when he leaves office. Is he going to go to Hollywood? Is he going to become a college professor? Speculation is rampant on those shows.

KALB: Howie, you say -- can I throw a question at you -- you say in the book nobody knows anything. But you do not make any real recommendation about how to handle this culture, this assaulting culture.

Let me try something really wild. Would you have CNBC on and turn off the audio? Is that what you're suggesting?

KURTZ: No, I think the information provided by CNBC, CNNFN, TheStreet.com and all the other sources is terrific for investors. We have a communications revolution here that enables ordinary people to get the same information real-time that used to be available only to the Wall Street hot shots.

All I say is that you've got to be cautious. You've got to be careful. You've got to keep in mind that some of the people coming on TV or on the Web may have an interest in talking up or talking down a stock. And the best journalists are those that help provide the context so people can understand that.

I think some shows are lazy and just looking for talking heads to make it sound like it's easy to make money on Wall Street. It may be easy for Jim Cramer. But it's not easy for ordinary mortals.

KALB: Terry, you talked a moment ago about the fact that they're out there to sell and that people and that people out in the field are savvy. The fact is when the Emulex report happened, the stock went way down because people were listening. So in other words, it has a powerful -- a tsunami impact on people.

KEENAN: That was a one-time case. I was out of the country. I know the stock did react very swiftly. We are in a momentum-driven market.

But I remember the days in the 1980s when Dan Dorfman (ph) would come out with one of his reports or the "Herd on the Street" column in the "Wall Street Journal" would come out negative on a stock. And a lot of these stocks moved much more precipitously. And those reporters had much more impact on the market just because there was less information out there than there is today.

KURTZ: Terry, let me just...

FABER: Let me make a point on Emulex if I can. That was very different from your typical rumor. That was a hoax perpetrated by somebody who is probably going to jail.

That was a press release ostensibly issued by a company. That was a true fraud. That is very different from the day-in, day-out rumors that simply are around on Wall Street.

CRAMER: Yeah, I got that release. I thought it was worth taking action on immediately. I tried to bank some Emulex down. Of course, no one was willing to buy it.

But I mean, I have to tell you, that thing came off the Bloomberg wire. I thought that looked just like everything else that comes from Bloomberg.

KURTZ: Right. And that of course is something that Bloomberg is embarrassed about because by putting it on the wire, it let everybody think that this was legitimate. They hadn't made the confirming phone call. And I think they're probably going to be a little bit more careful the next time.

We are out of time. I want to thank you all for joining our discussion, Jim Cramer, David Faber, and Terry Keenan. Thanks very much for joining us.

Well, just ahead, Bernie's "Back Page."

(COMMERCIAL BREAK)

KURTZ: Time now for the "Back Page" -- Bernie.

KALB: Like any reporter, I love getting a big exclusive. And I've got one really big. Now you probably don't know that I have lots of sources among these folks.

(BEGIN VIDEOTAPE)

KALB (voice-over): And so these last few days ever since this ad popped up in the media -- and took them by complete surprise, I might add -- they've been talking to me off the record. And here's what they're saying.

First of all, they are outraged. They are furious about being dragged into all this gibberish between Bush and Gore.

GOV. GEORGE W. BUSH (R-TX), PRESIDENTIAL CANDIDATE: I'm telling you, I don't think there is a plot to try to put subliminal messages in the people's minds.

AL GORE, VICE PRESIDENT OF THE UNITED STATES: I find it a very disappointing development.

KALB: What's more, the ad makes it appear that rats are Democrats. Well, that's crazy. My sources tell me rats have as little use for Democrats as they do for Republicans. In other words, a plague on both their houses.

We rats hate attack ads, they say. Rats think attack ads are something only homosapiens engage in because humans simply aren't as decent as rats.

Now it is not that rats don't hold elections of their own. They do. And they also pick their own president. But they say it would never, never occur to them to run an ad like this. This fellow says rats would find such an ad immoral, unethical.

Also, rats have already carried out their own campaign reform. No more soft cheese. So they're way ahead on this issue.

But what rats find really inexcusable about this ad is that it robs them of their dignity, that it disses them in a subliminable (ph) way.

(END VIDEOTAPE)

KALB: Let me sum it up this way. Rats feel they've gotten a bum wrap all through history. For example, being blamed for the Bubonic Plague 600 years ago. And they've been trying to shake off their reputation for sneakiness, deviousness, and just plain disgustingness, hoping for a new image in the 21st century.

And now that ad. Life is so unfair.

KURTZ: Well, I wasn't around for the Bubonic Plague. But I do think it's interesting that Al Gore's campaign was able to take that rats ad to the "New York Times" and get a front page story even though the very same image, the subliminal image, had been discussed two weeks earlier on Fox News. That shows you the power of "The New York Times." And it's left the Bush campaign saying, "Rats."

Bernard Kalb, thanks.

We'll be right back.

(COMMERCIAL BREAK)

KURTZ: Well, that's it for this edition of RELIABLE SOURCES. I'm Howard Kurtz.

Join us again next time for another critical look at the media. "CAPITAL GANG" is up next. Mark Shields has a preview.

MARK SHIELDS, "CAPITAL GANG": Howie, we'll look at the distractions plaguing George W. Bush's campaign and the first Hillary- Rick debate in New York. Democratic General Chairman Ed Rendell joins the gang for that and much more right here next on CNN.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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