Famous investors – hedge fund managers and the like – appear on CNBC and other financial media outlets frequently. Leon Cooperman, Jim Chanos, Ray Dalio, Carl Ichan and Paul Tudor Jones are familiar to CNBC addicts. Most famously, William Ackman said “Hell is coming” back in March on CNBC, at the outset of the Covid-19 economic shutdown and related stock market downturn. When you see, hear, or read one of these managers make a statement, what should you do as an individual investor? After all, these guys are billionaires, so they should know what’s up, right?
A Grain of Salt
It turned out that Ackman’s fund made a $2 billion profit by shorting the market during the March downturn. Did he use his platform on CNBC to manipulate the stock market so as to maximize his profit from his short position? I wouldn’t go that far, and the SEC hasn’t investigated him – yet. However, mega-investors can be ruthless and don’t seem to care about their public perception as long as they make money for their clients. I believe that a lot of the managers you see on TV have an agenda greater (to them) than to inform the public what they think the stock (or bond) market is about to do. They want to make money for their clients or investors, and if you are watching them on TV, you are most likely not their client, and so you are not their primary interest. So, be skeptical when you hear something from one of these investors. Understand where they are coming from, especially if the TV interviewer doesn’t do a good job of cross-questioning the investor. Be skeptical, and take what they say with a grain of salt, as the old saying goes.
What about Warren Buffett? The soon-to-be 90 year old “Sage of Omaha” is in financial media as much as anyone. His track record as an investor is unparalleled, and he seems like a friendly old man. Why shouldn’t you trust everything he says? Because even he has his own agenda, which is to maximize the value of his company, Berkshire Hathaway, for his shareholders. While Buffett may not use the media to talk up or talk down a particular stock or an entire sector or market the way others may do, he is projecting an image for himself and his company. He and his bridge partner Bill Gates started the Giving Pledge, which is a really good thing, but Berkshire Hathaway is not part of it. Buffett wants to make as much money for himself and his investors as he can, just like any other manager.
What To Do Instead
Instead of listening to what one of these managers says and acting accordingly, you should do what they do, not as they say, especially Buffett. Buffett’s formula is: Do your homework; buy stocks that you believe are undervalued; hold them for the long term; only sell when you think the world has changed for that stock. That’s a great formula to emulate, and one that has served many managers well over the years, especially Warren Buffett.
The financial media is like the rest of the media, especially with respect to talking head interviewees. Be very skeptical of what they say and don’t react solely based on their words. Instead, be confident with your own strategy and methods. Just because you aren’t being interviewed on CNBC doesn’t mean you aren’t as smart as whoever is being interviewed.