Media Bias? Follow The Money

My views on media bias have changed from the days I used to work in commercial radio - the media business has changed too.  But this rant is directed at my favorite fish in a barrel, CNBC. Here's a taste of CNBC headlines:

• Bounce of The Century!
  
• Market Tips: Get Your Cash into This Rally
• Pros Say: Cash is Now the Riskiest Bet
• Hirschhorn: 5 Reasons to Get Back Into the Market

This from a network that was touting non-directional "absolute return" CDs.

I claim that CNBC's bias is toward advocating things that are bad for your financial health.  Market timing, active trading, complex, hard-to-understand investments with opaque fee structures, what's the connection here?

The answer is the advertisers...Charles Schwab, Fidelity, E-Trade, and off we go.  Wall Street makes its money in a number of ways, but the main way is by taking a piece of the action, often whether or not the outcome of the action is any good.  Examples:

• Investment banks take a fee for issuing bonds in a leveraged buy-out, even if the bought out company then craters under the weight of its own debt.
• Credit cards take 2.5% to 3.5% of everything from merchants, and then hit shoppers with 20% or more on an overdue balance.
• Mortgage brokers take a fee up front for a completed mortgage even if the home owner defaults.  The broker might take a bigger fee if the home owner takes a higher interest rate, regardless of whether this is good for anyone involved.
• Mutual funds take 1% of your money every year, whether their investments go up and down.  If they run up trading costs by trading like crazy, you pay that too.
• Hedge funds take 20% of the profit they make with your money.  They don't eat 20% of the losses.

So what is CNBC's bias?  I think it is to advocate strategies that create a "cut" for their advertisers.  If it wasn't they might say something like:

• Pick an asset allocation that makes sense for your financial goals.
• Build a portfolio using the cheapest vehicles that meet the asset requirements.
• Rebalance periodically, and let it sit.

And hrm...if you do that, you don't really care whether this is the bounce of the century, do you?