Snake-Oil Salesmen? Debating the Role of the Financial Media
Published on - March 18th, 2009 (by J.D. Roth) Jim Cramer is the manic host of CNBC’s Mad Money, a television show that offers stock recommendations and investment advice. Jon Stewart is the host of Comedy Central’s satirical news program, The Daily Show. Cramer and Stewart engaged in a war of words recently, which came to a head last Thursday night when Cramer appeared on Stewart’s program.
Stewart’s complaint is that CNBC doesn’t offer financial news and advice so much as it acts as a cheerleader for Wall Street. CNBC sells itself as a network of financial experts, but they were as unprepared as anyone for the economic collapse. And now some CNBC personalities seem to be engaging in brazen hypocrisy, lambasting non-experts (like “loser” homeowners) for not seeing trouble coming.
“Let me tell you why I think this thing has caught some attention,” Stewart told Cramer. “It’s the gap between what CNBC advertises itself as and what it is…[You and I] are both snake-oil salesmen to a certain extent. But we do label the show as snake oil here. Isn’t there a problem selling snake oil as vitamin tonic?”
Stewart grilled Cramer for over 20 minutes on Thursday, asking him why CNBC doesn’t do more investigative reporting, doesn’t ask tough questions, doesn’t raise red flags about companies it knows are in trouble. Here’s one exchange from the unedited video:
Stewart: In what world is a 35-to-1 leveraged position sane?
Cramer: The world that made you 30% year after year after year beginning from 1999 to 2007. And it became very difficult to —
Stewart: But isn’t that part of the problem? Selling this idea that you don’t have to do anything? Any time you sell people the idea that “sit back and you’ll get 10 or 20 percent on your money”, don’t you always know that’s going to be a lie? When are we going to realize in this country that our wealth is work? That we’re workers. And by selling this idea that of, “Hey, man — I’ll teach you how to be rich” — how is that different than an informercial?
Cramer: Well, I think that your goal should always be to try to expose the fact that there is no easy money —
Stewart: But there are literally shows called Fast Money!
Cramer: Well, there’s a market for it, and you give it to them, and I think that —
Stewart: There’s a market for cocaine and hookers! So what? What is the responsibility of the people who cover Wall Street? Who are you responsible to? The people with the 401(k)s and the pensions, and the general public? Or the Wall Street traders?
It’s uncomfortable to watch Cramer take his lumps, but at the same time, the interview is fascinating. Stewart seems to be saying that the people who have been giving financial advice are complicit in the failure of the system. And if they’re not actually experts, if what they’re providing is only entertainment, then their advice is no better than playing the lottery.
Remember: In general, it pays to ignore financial news. Sound investing is based on your personal financial goals and a pre-determined investment strategy. It’s based on time-tested wisdom from actual experts, not on daily updates from talking heads on TV. The shallow, breathless reporting in certain corners of the financial media simply fans the fires of greed. It de-educates.
When you watch shows like Fast Money or Jim Cramer’s Mad Money (or even Nightly Business Report), do so with an active mind. Be critical of the information you hear. Ask yourself what motivation the network and the reporter have, as well as the people they profile and interview. Should you trust a CEO who says her company is doing great? Is short-term market movement really important if you won’t retire for 30 years? When a show recommends a stock, do your own research, and don’t just trust the host.
See also: “Traders Profit Best by Ignoring Most Financial News” from Smart Money.
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You beat me to the punch on this…I just saw all these videos yesterday and, like you, I was fascinated.
Give Cramer credit, he went on a show that was going to nail him to the wall. But what he’s trying to articulate in his defense is ugly: that he acts one way for his show because it’s entertainment and that he believes something totally different in real life.
I’ve seen excerpts from his books and they’re actually pretty good. Sensible advice.
His show? It’s entertainment that people want to believe in. It’s like watching those UFO specials or conspiracy theories.
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I enjoyed the exchange between the two. Jon Stewart may not be a financial expert but he can sniff out the bullshit pretty well and isn’t afraid to air it.
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It wasn’t just the media being complicit. We saw the home-ownership figures go off their long-term trendline, and typically when things go off long-term trends it is a good idea to ask why, but the administration in 2003 did not ask nor entertain such questions.
Cramer’s a brilliant guy, but to produce meaningful content for a show every day cheapens the knowledge that he could provide. It’s an effect of constant 24/7 media: typically harmful.
On the financial networks today, there are running counters of the DOW and SP500 and Tokyo exchanges updating every second. Is there meaning in those every second, or even daily, changes? No. A good background in economics would teach that its the trend that matters, that there is too much noise in the smaller unit observations to draw a reliable conclusion.
It is a frustrating situation, especially for an economist who has been watching his profession mocked or demonized recently…
How’d we get so arrogant?
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My favorite line from this post: “The shallow, breathless reporting in certain corners of the financial media simply fans the fires of greed. It de-educates.”
It’s so easy to get caught up in media hype (“real” or fake, though it’s becoming harder to tell the difference). Many people don’t know that much of the “news” on television is simply there for entertainment purposes, like Cramer’s show. It’s frightening, the influence the networks have, and even more frightening that they don’t take that responsibility more seriously.
A couple of years ago Katie Couric was interviewing Jon Stewart and she asked if it concerned him that most (I’ve forgotten the percentage) young adults say they get their news from The Daily Show. Stewart asked if it concerned her that most other adults get their news from the networks. Good point.
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When I saw that show, I said to myself, Finally somebody is sticking up for the rest of us. We’ve all done what “they” (Financial experts) say to do, and yet, we’ve lost 50% in just a few years.
Thank goodness Stewet had the balls to talk to this man Cramer for the rest of us. And the fact that Stewert talks to a whole generation of younger Americans will speak volumes in years to come.
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Jon Stewart is funny. He is a good entertainer and he brings a different view to the news. (it is scary that he is the only source of news for some people)
But if he was such a good “investigative reporter” why didn’t he identify these issues before it happened? Why doesn’t somebody interview Stewart and say, “Hey, you are in the news business, it is your job to identify wrongs in society and prevent things like this. What were you doing, why did you let this happen Jon?”
I’m sorry but it’s really easy to flame Cramer, etc. now.
I’m not that impressed.
This is not to defend Cramer of CNBC at all. I never found them worth watching. It’s just that I don’t find the interview as any defining moment in news!
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We don’t get CNBC in the UK, but we do get the Daily Show. Most of the excerpts they showed from CNBC weren’t exactly what I’d describe as investigative journalism – and certainly appeared to treat regular investors as idiots. Stock tips should be treated like racing tips (which are broadcast on the BBC and other British channels) – no one expects them to be without foundation, but neither do people exactly expect them to be right all the time either.
Americans (like everyone else) are easy pickings for get rich quick schemes – I imagine that CNBC were doing the same sort of thing in the run up to, during and after the tech shares bubble. And to be fair, it really is hard for people to realise when there is a bubble going on (only in hindsight is it obvious) especially if the bubble is the financial markets / the system.
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@Tim L:
I kinda thought the Daily Show was topical comedy rather than either journalism or the news.
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I’ve been saying for some time that all this cashing out of Wall Street was at the expense of the 401k owners since most of us have no way of cashing out on the fly, and limited opportunities to change investment directions.
I also found it surprising that Jim didn’t admit that his show’s content is driven by the advertisers and has nothing to do with the real world.
CNBC should go down for pretending to offer legit investment advise under the guise of entertainment. This is exactly why NONE of your 401k administrators will pick your investments for you or offer you any advise. Nobody wants to be responsible for massive losses to another person (unless there is a motive obviously).
As unfortunate as it is, in this Financial Age of the USA, the average Joe is going to constantly keep getting sucked dry by game-playing scammers. Until the population realizes that there is no golden egg that can promise a 8% return annually and that greed is going to be your downfall, we will always be subjected to the shadow systems of investing. People need to realize that just like everything else in this world, there are layers to everything. And the more and more you get involved with something, you start to see the layers unfold. There is always going to be somebody who has a deeper understanding, sitting in the back of the arena, manipulating players like puppets and they don’t even know it.
Jim was sent there as a sacrifice from CNBC to save their own face.
I watch Jim for entertainment sometimes, but mostly he just gets old. His callers probably go out the very next day and do exactly what he says, they all seem to worship him.
I will say that anyone who watches the show should have heard Jim say more than once, that:
“You should never speculate with money you can’t afford to loose.” and “Only once you have fully funded your long term financial plans should you start investing in the stock market directly.”
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I think Stewart is a bit naive for thinking that CNBC and other media outlets are anything other than pure entertainment.
It’s ironic that there have been a lot of articles recently about the decline of print media – meanwhile most newspapers just write articles and headlines to sell newspapers – not to report the news.
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“Remember: In general, it pays to ignore financial news.”
Exactly. It’s no secret that their interests are not aligned with our own.
With financial news–just like every other area of news–the media has to sensationalize things. That’s how they get people to watch it.
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@Jim Z (#9)
Thanks for some context RE: Cramer. I’ve never watched his show except in snippets. (Actually, I’ve never watched CNBC except in snippets.) I have no feel for his financial philosophy. Your comment helped me to understand his position a little better.
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The unreliability of the financial media is an old story, as old as Wall Street itself. And it is patently obvious that all financial media no matter how spiffy are really not in the business of helping you make money. They are in the business of selling advertisements.
There is good info out there, but your best bet is finding someone who has done research and is showing you how to learn to understand signals and the routine behavior of the markets. No one that knows which stock will go up or down gives that info away.
Think about it, if you knew just one company that would return 15% every year, you would accumulate a significant amount. No one gives away real info on things that can return 25% in a qtr.
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I wouldn’t lump PBS’ Nightly Business Report with the pond scum that CNBC slings. NBR reports the news of the day and gives little advice in a half-hour. They are not the snake oil salesman slingin’ BS that CNBC does 18-19 hours a day. I watch NBR just to find out what happened in the markets that day or listen to the podcast on the way to my office the next day. That’s all I need when it comes to financial information. That and my WSJ in the morning–yes I still read newspapers.
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To those who think Jon Stewart doesn’t do any of his own investigative journalism: It’s a comedy show, and they make that known.
To those who think Jon Stewart was naive for thinking CNBC and the like provide anything other than entertainment: The problem is that CNBC and other financial media outlets don’t tell people that what they’re providing is mostly just entertainment and not really useful advice. Those who have done their research and truly understand personal finance already know that financial media is useless. But the general public doesn’t – and that’s the problem. It’s false advertising of sorts.
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Thanks JD.
It reminds me of those emails we get from a business person in Nigeria telling us about the millions we have just been given. All we have to do is…..
Kramer is an entertainer. Has he contributed to the problem? That’s his problem. But if I fall for that junk, I am responsible.
Kramer deserved what he got in my world, but my fear is that he becomes another excuse to escape personal responsibility for the actions we take.
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How much of the present panic has been triggered by the over reporting of the financial situation. In the 80′s you knew there was a recession, but did not hear it constantly so you focused on working towards the future not running for the problems. With the advent of “24 Hour News stations” you hear the same reports over and over if they cannot find enough bad news to fill the time perhaps they could do the world a favor and report some good news!
It would be good to hear of company’s hiring and doing well in this economy. And people making something of themselves.
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Your typewritten account of the unedited video leaves out “There is a @#$%^%&* market for cocaine and hookers.” Why did you change it?
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@Paul (comment #15)
I agree that it is false advertising but what business doesn’t do false advertising on some level?
Every single business in the world exists to make more money for itself which has to be at the expense of it’s customers.
Most companies market themselves as “trying to help the customer”. It’s not really true.
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The problem isn’t just financial news, it’s all news. This was the same issue when Jon Stewart had a feud with Tucker Carlson too. Both TC and Jim Cramer try to say “But you do it too!” and Jon Stewart says “I have a comedy show you’re on a news channel!” But nobody in the news channels think of themselves as news… it’s all entertainment and ratings. They don’t see a difference between a comedy show and a news show, both are just platforms to get ratings.
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Ditto #15. And Tim (#6), he stated in the interview, as JD pointed out, that he’s a comedy show. He shouldn’t be on the hook for doing “investigative journalism” any more than Couric should be on the hook for doing comedy.
His skewering of Cramer was pure brilliance. He talked to Cramer like so many of us ‘ordinary Joes’ would like to talk to someone like that. Stewart even told him, why don’t you go back to journalism and I’ll go back to fart jokes, okay?
If you want to see more of Jon’s philosophy, look up his skewering of Crossfire. He explains there too that he does a COMEDY SHOW and these people who are purporting themselves to be presenting facts and doing hard-hitting interviews should do a better job of it, and of serving the public, instead of hurting America (which he stresses on the Crossfire interview).
Just like we can blame people for not doing their homework and understanding the loans they were getting themselves into, Cramer et al deserve some of the blame too – just like the banks who knowingly approved loans that should never have been approved.
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@Four Pillars (#18)
False advertising is illegal. Even if most businesses flirt with it, it’s not right and the only way for the consumer to push back is to expose the dishonesty, a la Stewart.
I’m not sure what your point is – you seem to say we should grab our ankles and take whatever the powers that be give us. I can’t agree with that. The free press exists to arm the populace against tyranny, and I think we can and should encourage it to do its job.
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When will the stenographers in the lapdog media do some investigative reporting is what I want to know.
Retired is right, the overhyping of the media (which I believe was intentional in trying to get Obama elected) has made the situation MUCH worse than it would’ve been on it’s own.
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@Four Pillars (#18)
I would disagree that for a company to make money for itself that it has to be “at the expense of its customers”. Sure a company is out to make money, but I would argue that any truly successful company has only succeeded by providing something of value to the customer and by providing a win-win situation for them. Any company that has its foundation in doing something that is really bad for the customer usually doesn’t succeed in the long term.
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I love Jon Stewart, but with this, as with crossfire, I think he overestimates the importance of the media.
Sure, Cramer and his ilk are scum, and complicit in a business media that takes advantage of peoples’ fantasies in exchange for ad dollars – they are as scummy, and no scummier than, advertisers in general.
As snake oil salesmen, though, it’s hard to expect them to be bastions of investigative journalism. It’s hard to fault them for not exposing the financial crisis – after all, the causes of the crisis were hidden, not just from the public, but from insiders who are supposed to be able to handle this.
Cramer and CNBC are not really even worth Stewart’s ammunition. They are petty criminals surrounding the actual perpetrators of this crisis.
Finally, it may not even make sense to demonize the real perpetrators, the corporate finance giants. After all, they have a legal duty to pursue the best profit for their shareholders. If a competitor discovers a way to make money faster using a riskier technique, and persists for a few quarters, there’s enormous pressure to copy those risky strategies.
It’s tempting to demonize people, and important to understand the ways in which just about everyone has some guilt. At the end of the day, though, we should not kid ourselves that greed, exclusively located in the hearts of a few bad CEOs, is the source of this problem. There are structural flaws in the financial system which turn reasonable, non-evil people into criminal pirates in the course of ordinary business.
Stewart should take that on – unfortunately, sober analysis of complex problems is outside his bailiwick, as it is with normal TV news, newspapers, and pretty much everyone but book-length academics and, to a lesser extent, policymakers.
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“Stewart seems to be saying that the people who have been giving financial advice are complicit in the failure of the system.”
Um, I’m pretty sure that’s verbatim what Stewart said.
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I think Stewart was spot on with his treatment of Cramer — and not just Cramer, but the entire network.
The thing is, Jon Stewart is upfront about what he is — a comedian, albeit not so much the funny kind but the biting political- and social- satire kind. He’s coming from the place of the court jester — the one person who can say the emperor has no clothes and get away with it.
The problem with Cramer and his cronies at CNBC is that a lot of people view them as authority figures in the financial field. They are presented as such. They are not presented as fantasy finance. But that’s what they feed us and more — they feed us a specific agenda set by the network itself.
Heck yeah, Cramer et al are complicit in the current financial situation. It’s insufficient to say “they can say whatever they want, when I act it’s my responsibility.” The same onus falls on them. They have a responsibility to behave with integrity and with a sense of professional ethics, since they ARE pushing themselves off as financial experts.
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“And if they’re not actually experts, if what they’re providing is only entertainment, then their advice is no better than playing the lottery.”
Actually, it’s no better than investing your life savings on a sports bet because someone on ESPN said a certain team would win.
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These are facts not my thoughts:
1) When people pick winners, they think that it is due to their abilities. When they pick losers, it wasn’t a failure on their part, but some unforeseeable special circumstance.
The result of this is that people often take more risk than is responsible. Because they think that they are right.
2) Most people are unconcerned with the how and why of actually making money thru investment. They see it like horse racing or some other sort of gambling. They want to be told bet on Company X, its a winner.
The effect of this is that when things go bad, they are easily convinced that the advice giver really has no blame.
These 2 things combined, means that the average investing public is always eagerly awaiting the next get rich quick scheme, the next sure fire way to riches.
There will always be a CNBC or some such outlet, because it is profitable.
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I think the problem with the financial news is that it gives you an urge to change your portfolio.
I still believe passive investing with a balance of index funds is the best way to go. All you need to do is rebalance your portfolio once or twice per year.
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“’Hey, man — I’ll teach you how to be rich’ — how is that different than an informercial?”
Was I the only one who thought of yesterday’s guest post when reading that quote? I guess his (Ramit’s) blog really is a lot like an informercial, now that I think about it!
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As Jon touched on, America’s wealth comes from work. Producing actual products is what grows a country. That is why China is growing at amazing rates, while America has been decaying for decades. More and more, we are a country of “intellectual property” and investment bankers who provide no actual good or service, but simply leech money from the bottom 95%.
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CXO Advisory group has done studies on Cramer’s suggested stock picks. The funny thing is, that over the period of time they covered, if you did the opposite of what Cramer told you to do you outperformed the market. If you bought what he suggested you vastly underperformed. I blogged about this on my blog a day before the Cramer interview on the Daily Show. I caught it over there and was impressed with Stewart’s poise. I don’t recall where I saw this, but I saw somewhere that both shows (Mad Money and TDS) have had a ratings bump since the interview. I found that to be interesting. Anyway, nice post, JD.
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I find it interesting that people seem to be gloating over the way Jim Cramer got “schooled” by Jon Stewart. It only proves how short most people’s memories are. Wasn’t it Cramer who, in 2007, when things were just starting to go south, told everyone about it quite strongly (http://www.livevideo.com/video/ConspiracyCentral/C1B4486FAB9E4A298AF6A550D439B1F1/jim-cramer-s-complete-market-m.aspx) and was pretty much treated as a joke? How is it, then, that people can take him seriously now but not then? Whose fault is that?
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I used to really like John Stewart, but in the last couple years the hypocrisy of his show has gotten under my skin.
If Stewart’s show was “just comedy”, then was this interaction all fake? Stewart uses the fact that he is on Comedy Central as a scapegoat of sorts…he says one thing and does another. He acts as if he is giving real news (like, in this Cramer vs. Stewart interview. Did it seem TO ANYONE like Stewart was joking?) but if he gets caught not doing his homework he says “That’s not my job, its just comedy.” Pick one, either you’re “just comedy” or you’ve got something of substance (at least sometimes) and if that’s the case you’re just as responsible as the people you’re lambasting.
The truth is, people want to blame someone other than themselves for the mess they’re in, and Stewart is increasing his own ratings by pointing the finger and saying “Its their fault, let’s get them!”
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You are over thinking things, Des. His show (intentionally) makes people laugh. Ergo, comedy show. The content is irrelevant.
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The most interesting part of the show was something you didn’t mention – the clips of Cramer talking about his illegal activities. Stewart asked Cramer how the average guy can win at this game when the “experts” are breaking the law and manipulating the market?
And what about the dubious headlines this week where the President and Bernanke are claiming we’re over the worst, and Citigroup is claiming they made a profit in the past two months? There are a lot of credible people who think these announcements are bogus attempts to boost the market.
And really, if you think about it, if things were really bad or going to get worse, do you think any of these people would actually tell the truth? “Hey everyone, the market is going to crash! Move out your retirement funds!” There’s no way that is going to happen.
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Personally I’m tired of all the negative news altogether. I’m tired of doom and gloom. The truth is the world isn’t going to come to an end. People need to turn off the TV, learn from what has happened to either them or someone they know during this economic downturn, and focus on getting their own financial house in the right order – starting with GET OUT OF DEBT.
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JD – great advice. I think that being critical of information should not be limited only to finances:
When you (watch the news, sit in church, listen to advice from anyone) do so with an active mind. Be critical of the information you hear. Ask yourself what motivation the (people offering information) have.
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I wonder how many people actually put Cramer’s philosophy (or at least what he rants about on his show) into practice? 1% of the population, 2%? I can’t believe it’s actually a large number. I guess what I’m saying is I hope there’s not that many people out there that are that dumb.
That being said, I think Stewart was right to be asking questions about why they didn’t see some of this coming. I mean, come on, we just had a tech bubble in the early 2000′s and then the housing bubble came along right after it and no one thought there was an issue?
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One of the things that fascinated me was that their “debate” was a headline on the cover of USA Today last week! When a “debate” between a satirical comedian and an “expert” stock picker makes headlines, is something wrong with that?
Plus the fact that it takes a satirical comedian/show to point out what financial experts are doing wrong. Isn’t that the role of journalists?
Interesting…
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“Stewart seems to be saying that the people who have been giving financial advice are complicit in the failure of the system.”
Not true at all, if that’s what he’s saying. Do you know what your ground-level financial advisors tell their clients? They say “TURN OFF THE TV. We have an investment plan for a reason.”
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@Dave #31 – no, I thought of it too. And honestly, except for his guest post yesterday, most of what I’ve read on his site sounds like an infomercial.
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It was a great interview to watch and I enjoyed how serious Steward was. I think Cramer did a great job of taking hits and explaining things out.
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Dominic,
Thanks for pointing out the link of Cramer’s Meltdown. I think Cramer is a shrewd man and very smart. It has to be tough to fill his infotainment show each day. His books are very good.
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Its funny, many people have been saying what Stewart has been talking about for years, yet nobody listened. But it took a comedy show of sorts to talk about it, and finally a whole nation opens their eyes. Something is really wrong when a Comedy Channel has to set things straight.
There is tonnes of articles where Cramer has royally screwed up, but its not really about him but the networks that facilitate this type of hype to pump up their own positions.
Hopefully people that invest will see that when it comes to money, you cannot trust anyone but your self.
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Ok guys! I know that the Daily Show is said to be just a comedy show!
But if they are then why would they have Cramer on the show? Tucker Carlson? Where’s the comedy in this?
I didn’t see much comedy!
John Stewart is hiding behind comedy (and does a good job with the comedy in my opinion) to not take any of the blame for what he says!
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I’m with you, Tim L. I felt that Stewart would ask some hard questions, but when the heat was turned on him, he reverted to the “I’m a comedian” bit.
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“John Stewart is hiding behind comedy (and does a good job with the comedy in my opinion) to not take any of the blame for what he says!”
That’s my take as well; he wants to have his cake and eat it too.
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OK, I just have to ask: was there really anyone out there who didn’t at least suspect the credibility of 24 hour news channels, talk radio, and pretty much anyone who purports to give financial advice on TV?
CNBC is the financial equivalent of the WWF … Network news is WWF with less makeup … And talk radio is WWF with violence (albeit verbal).
The credibility of the “information industry” (and that name should just set off all sorts of alarms by itself) just hasn’t been there for a long time …
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