Because they’re the ones trying to say they know how to get us out of the problem.
One, CNBC says, “In Cramer We Trust,” when clearly his advice can’t be trusted all that much. Two, Cramer’s the one who got pissy about Stewart’s initial salvo on CNBC in general, and as the old saying goes, the squeaky wheel gets the pie in the face.
But there is one person that is supposed to know a lot more than the other person, right? There is one person who has written hundreds of mortgage loans, and the other person who has experience with maybe one or two previous mortgage loans, right? The person loaning out the huge sume of money should be able to judge the credit-worthiness of an applicant, just like he was trained to by his employers, right? If the loan is made to a person who really can’t afford it, who is the most to blame? You are pretending that they have equal knowledge in this situation. They don’t.
Here’s my experience in the past 8 years.
Case 1:
About 5 years ago we are looking for a bigger house because child # 2 is on the way. My wife sees some new houses in the neighbourhood. Asking price: $1,000,000 dollars (approximate price, remember that this is Southern California). She asks the agent on location “How much money do people earn that buy these houses?” His answer (verbatim): “If you make about $50,000 a year you can afford one”. Sure, with a down payment of nine hundred grand!
My wife encourages me to talk to the real estate agent. I tell her it’s a waste of time but she is really keen on the idea. So the agent and a mortgage person (from a large bank that shall remain nameless cough Citibank cough) come to the house, go over our financial situation, and the guy from Citibank assures me that with an interest-only loan for five years, I will be able to refinance at a lower rate when the five years are up, by this time I will have more income and what not, and if ever I am worried I will be selling at a profit in case I decide to move out of state because the market has nowhere to go but up so this is a great investment if our long-term plans mean moving somewhere else. After one hour arguing with them I tell them I’ll think about it and usher them out the door. The banker and the agent call me no less than three times over the next few days to tell me I am making a big mistake. We didn’t buy the million dollar house and we’re still living in the same house. But of course, if I had bought the million dollar house, it would have been all my fault! The Citibank guy was just looking out for me!
Case 2:
A couple of years ago a “financial advisor” that my wife meets through one of her clubs comes to our house to give us a talk about our financial future. She is accompanied by her mentor, a man with “many years experience”. Their advice: cancel our life insurance, get theirs which is so much better. Refinance our mortgage, because theirs is so much better with a new fancy way of calculating interest which means that over the long run I will be saving tens of thousands of dollars. After they leave I go over their numbers and prove to them in black and white that with their mortgage I would be losing thousands of dollars in the long-term. They keep on coming back with different numbers “but if you borrowed this much and used it for home improvements you would end up saving money due to the way we calculate interest.” Each time I showed them in black and white how my current mortgage was better on paper. Eventually the “mentor” said “I’m not sure why your numbers come out the way they do, you are mistaken but I can’t explain exactly why, I’ll talk to one of my loan experts and get back to you.” That is the last I heard from him. It took me two weeks to get rid of those guys. (There is a thread in GQ where I asked about mortgage interest calculations, the guy was so sure of himself that at first I was thinking that I must be making a mistake.) If I had refinanced with him, of course, it would have been my fault - I just didn’t understand the expert!
The constant refrain I heard in both of those cases was “We’ve been doing this for years, we are telling you what is the best thing to do. You should listen to us.”
I’m sorry, but these “financial experts” who are supposed to understand all this are the ones that screwed up. Not Joe Homeowner buying his family home.
Not to mention that the prospective homeowner wants the loan. Someone who has their heart set on a house but doesn’t quite have the financial situation to pull it off is going to jump at it when a loan officer tells them it’s doable. If it’s a truly weird situation, like buying a $1 mil house on a $50k salary, then you really would have to be a blithering idiot to not be skeptical, but $500k on a $50k salary is a lot more tempting and fewer people are going to be likely to really dig into the terms. After all, the loan officer said they could do it.
Did you watch the sequence in question? He started by criticizing Santelli, and showed a number of CNBC analysts, including but not limited to Cramer, fucking up, and also showed a spineless interview with Allen Stanford. He did not pile on Cramer at all; Cramer was just the only one who wrote an article defending himself against the Daily Show’s “urban legend.” And then he went on several NBC shows the next day to defend himself. You should watch these clips.
This is absurd.
A clarification in case anyone gets the wrong impression - my wife is not totally clueless; we are making more than $50,000 a year. And from the numbers that our helpful mortgage broker was writing on paper, she was almost believing that it was doable.
My bad, I misinterpreted.
I wasn’t sure if you misinterpreted. The real estate agent did say to her “people making about $50,000 a year could afford one of these houses.” So she, knowing our income, thought “hey maybe we could buy one too!” She was of course taking into consideration the fact that we had a house to sell. Knowing what I know now, it would have been a big mistake for us to buy that million-dollar house. But the fact is, at the time, I didn’t know. And I was wondering if maybe I was missing out on an excellent investment. I saw many acquaintances and colleagues make out like bandits with their houses when they sold and moved to Oregon or Washington.
This recession has been an enormous ego boost to my intellect. I’m fairly young (early 20’s), and my mom sells real estate. I was always astounded at these people buying 500k houses on incomes of 50k, and figured that I was just kind of dumb when it came to money management. I mean, everyone keeps buying these televisions and nice houses, certainly they’re just really good at spending their money? No matter how I figured it, it just didn’t seem right that these middle-tier workers could get top-tier houses and living the lives they did. Turns out, I was right.
So, that’s one plus.
Then what is the intent of his show? I’ve only seen a few clips here and at friends houses when they channel surf, but he certainly seems to be telling people how to use the stock market to make money.
Precisely. He gives his assessment of market conditions and advice on what to sell and what to buy. It’s sheer sophistry to claim he does anything else.
TDS didn’t even pick on Cramer in particular; their montage reamed CNBC analysts in general for being spectacularly wrong on multiple occasions; and, more importantly, for lobbing softballs when interviewing sleazebag CEOs.
The Story of Deep Capture – Deep Capture Here’s a long story about Cramer and his fellow travelers who fleeced the market out of every dime .
This does not even include that the stock experts were telling their audiences to but stock from companies they worked for or had a big financial interests in. They were scamming and using CNBC to do it.
I don’t think so - I read an article a couple of years back that stated pretty much just this - that the American consumer isn’t trying to keep up with the Joneses, they’re trying to keep up with the families that they see on TV - who have huge homes and live WAY beyond their means (Friends, anyone?)
Well, bully for you. Do you refuse to get on an airplane until you’ve examined the engine thoroughly? Do you refuse to take medicine until you’ve conducted your own double-blind multiinstitutional placebo-controlled randomized studies? Do you refuse to eat a food until you’ve examined the factory where it was made, looking for contaminants?
Even if you’re the best little contract reader in Texas, I guarantee there are areas of your life where you rely on experts to protect your safety. You’re the awesomest at reading and understanding fine print, I get that–but other people aren’t. Many people lack the analytic skills necessary to complete this task; they simply cannot do it. I’m guessing you scored pretty high on the reading portion of the SAT, right? Look at where you are on the standard distribution, then look at folks on the opposite end of the curve from you. Do you really think those folks are going to be able to understand a contract as well as you?
Many folks cannot understand the fine print, not through lack of effort, but through lack of the analytic skills. What’s your suggestion: should they never own or rent a house, buy a car, take a contract-based job? Or should they be able to rely on experts with whom they do business to follow professional codes of ethics?
Daniel
I’ve often heard this term “fake news” with regard to the Daily Show, and I don’t know why. He talks about things that are really happening. He may be a satirist, but he’s talking about real events.
The Onion is fake news, but not The Daily Show.
True; “fake news” is probably not correct. But what they definitely are not: they’re not journalists. They shouldn’t be held to journalism standards. CNBC should.
I think “fake news” is a backformation (though I recall them using it themselves) taken from “fake news show.” Different animal entirely. They dress themselves up as a news show, but it’s meant to be comedy.
You think everybody’s parents explained mortgages to their children?
Nonsense. Cramer presents himself as a reliable source. People have been taught that reliable sources are a good basis for their important decisions. The same people have been taught that dudes selling shit out of a truck are crooks.
Bullshit. The show’s called ‘Mad Money’, not ‘Wise Long-Term Financial Advice, Take It With A Grain Of Salt’. Cramer focuses on areas, like stocks, from which one can extract previously invested money quickly.
Exactly, I also kept wondering what I was doing wrong I made a decent living but I didn’t have a starter castle with jet ski’s and a large cabin cruiser in the driveway.
Many people have lived well beyond their means for a long time, I’m not disputing that. It’s sometimes called “aspirational buying” and it’s a great name because as an attitude it makes me want to aspirate. What I was disputing is the notion that sitcoms are as much to blame as Jim Cramer is, which is nonsense. If you’re going to go that route you might as well blame it all on “human nature,” as if that explains why specific people made specific bad choices. No, people aren’t THAT stupid. They know sitcom homes aren’t realistic; anybody with an income and a place of their own knows those things are skewed. On the other hand, when somebody positions himself as a financial expert and claims to impart knowledge about the financial world that most people aren’t going to understand and then gives them shitty advice, that’s a much more blameworthy action.
I’m at the end of the unedited Stewart-Cramer interview, by the way, and Stewart says bluntly, twice, that his show is not fair and doesn’t pretend to be.