It’s a fun game, this stock-market malarkey. You watch CNBC, see a talking head recommend a stock ticker symbol, and then jump onto your computer to execute the trade. It’s so easy! And, for all that investors are continually advised not to act like brainless lemmings, that’s exactly what seems to happen.
You want proof? Check this out.
CNBC has, over the past couple of weeks, suddenly discovered an obscure Argentine energy stock called Petrobras Energia. On December 28, it ran an interview with fund manager Ken Heebner, who said that he really liked energy stocks in general, and Petrobras in particular. Except that the chart that CNBC ran to accompany the interview showed not Petrobras shares, which trade under the ticker symbol PBR, but rather those of its Argentine subsidiary, Petrobras Energia, which trades under the ticker symbol PZE.
That day, volume in PZE, which is normally around 360,000 shares, spiked tenfold to 3.6 million. Quite impressive for the quiet week between Christmas and New Year.
CNBC did acknowledge the error, but apparently it now had PZE on the brain, because the Argentine company was then featured on Jim Cramer’s show on Monday, where the madman said that it was an "underexposed Latin American energy stock that could be poised for big gains". Apparently he was believing his own hype: three days previously, in a call-in segment, he’d told a caller that PZE was a great way of playing Brazil, despite the fact that PZE has a separate listing largely because it’s not a Brazil play. "You should buy this stock. I got to tell you, I like Brazil so much," he said.
And on the same day that Cramer was plugging PZE for a second time, CNBC had Ken Heebner on for a second time. You’re going to love this: he recommended Petrobras again, and CNBC showed a stock chart of PZE again – exactly the same mistake that they’d made less than two weeks previously.
PZE shares spiked up on Tuesday as result – just in time to receive a simultaneous double downgrade on Wednesday from the rather sensible analysts at Bear Stearns and Citigroup, who had seen the stock rise 30% on buying by CNBC-addicted sheeples, and who couldn’t believe their luck in being able to get out at a ridiculously high price.
Thus did PZE fall 15% in one day on Wednesday, and it’s falling further today, as well.
Now to be fair, CNBC isn’t the only media company to make this mistake. Forbes did it too, in November, but not in the context of a stock pick: it was writing about pipe manufacturer Vallourec, and said that it made pipes for Total, Exxon Mobil, and Petrobras, giving the wrong ticker symbol for Petrobras. That’s no big deal.
What’s truly ridiculous is the fevered atmosphere on CNBC, where viewers get so caught up in the rush of ticker symbols coming at them from their television that they don’t even stop long enough to notice that they’re actually buying an Argentine company when they thought they were buying a Brazilian company. And now Fox Business has started competing with CNBC, one has to assume that CNBC is going to become even more breathless and shallow.
The PZE fiasco might be an extreme example of what can result, but be assured that every time you buy a stock which was featured on CNBC, you’re acting in tandem with some very, very foolish investors.