Have you ever wanted to encapsulate everything which is meretricious, deplorable,
and downright odious about financial TV in one five-word phrase? For most of
us, "Mad Money with Jim Cramer" does the trick perfectly well. But
you – you can do better. Ladies and gentlemen, I proudly present the winning
phrase: "CNBC Million Dollar Portfolio Challenge".
The Challenge was an ill-advised stunt from the very start. It treats stock-market
investing as a game where he who takes the most ridiculous risks wins. It encourages
individuals to try to beat not only the market, but everybody else: a 2,000%
return doesn’t even get you to the finals if enough other people manage to get
a 2,200% return. And contestants are aiming for the kind of returns on a daily
basis that most sensible investors would be happy with on an annual basis. In
a nutshell, it turns the serious business of investing into a hype-drenched
horse race seemingly designed to glorify the most destructive and idiotic behavior
possible.
So, it’s good that BusinessWeek is taking
the Challenge down a few notches. But it’s depressing that Tim Catts concentrates
in his story on a very narrow reading of what is and what is not acceptable
with such games. He never once takes issue with the basic idea of the Challenge,
or how it works. And when one of the contestants admits to Catts that he was
gaming the system from the very start, Catts is quite unfazed:
When Kraber heard about CNBC’s million-dollar challenge earlier this year,
he knew he wanted to enter. But it wasn’t until he read the rules of the game
that he figured he had a pretty good shot at making the finals. The key was
that CNBC put no limit on the number of portfolios a player could manage,
and only the best-performing one would count. So Kraber, with his expertise
in statistics, computer-programming, and stock selection, could set up hundreds
of different portfolios, all pursuing high-risk, high-return strategies. By
sheer chance, at least one of his portfolios would do well, and he figured
that with smart strategic picks he’d rank near the top of all the participants.
"I realized I had an almost 100% chance of making the finals," he
says.
In the end, Kraber ended up putting together no fewer than 1,600 different
stock portfolios, just to make perfectly sure that one of them ended up doing
really well. Did he violate the rules?
Well, they do say:
CNBC reserves the right to terminate Contest participation by any Participants
suspected of cheating, attempting to exploit the contest or other inappropriate
behavior. All such action will be determined by CNBC in its sole discretion.
It seems to me that Kraber, quite clearly, was "attempting to exploit
the contest". Yet Kraber, according to the BusinessWeek story, is the good
guy! He complains that other contestants engaged in even more egregious behavior.
By fiddling around with queues in browser windows after the market closed, says
Kraber, they effectively managed to buy stocks in the knowledge that their earnings
releases would beat market expectations and result in a large boost to their
share price the following day.
If the allegations are true, then those contestants should probably be disqualified
for inappropriate behavior. Kraber doesn’t need to be disqualified, since he
only managed to come in in 12th place anyway – but if he were a serious
contender, then I’d be minded to disqualify him, too. But then again, I’d be
minded to disqualify the entire Million Dollar Portfolio Challenge as the epitome
of inappropriate behavior on the part of a cable TV channel.
And the scary thing is that Rupert Murdoch’s new business channel hasn’t even
launched yet. I fear to think what kind of stunts the Fox masterminds are going
to come up with to boost ratings.
