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  The brokers who hear the pregame report are then unleashed on their clients to talk up the in-house choices. “And if, say, Merrill Lynch is pushing Global Crossing, or Lehman Brothers is talking up cell-phone makers Nokia and Motorola—well, you can bet that such information will have an impact on the stock prices of those companies in the first half hour of trading,” Fast Company, a fast-track New Economy magazine noted in a largely admiring profile of CNBC. Of course, the information discussed during those morning calls falls into an odd category, Fast Company acknowledged: “For one, it’s more opinion and analysis than news.”10

  In other words, much of the brokerage house’s “morning call” consists of hype, designed to get a sales team moving. But after all, “opinions move stocks too.” Indeed, if 10,000 brokers are telling their clients something while the tip is simultaneously broadcast on CNBC—all before the market opens—the morning call is likely to become a self-fulfilling prophecy.

  How long the stock flies is quite another matter. But since CNBC operated in “real time,” all that mattered was knowing what was going to happen that day. Tomorrow would bring a new story.

  While Bartiromo broadcast live from the floor of the NYSE, Haines, Kernen, and Faber reported from the CNBC studio in Fort Lee, New Jersey. There, the trio created a locker-room atmosphere that delighted fans. Richard Hoey, director of equity research at Dreyfus, compared Squawk Box to a “bull market frat-house party,” and it was that frat-house feeling that suddenly made financial news fun for so many viewers.11 Indeed, the Squawk Box team resembled a trio of high school buddies spring term of senior year.

  Each adopted an on-air persona founded on his area of expertise. Haines, a fellow who, in the words of Fast Company’s Charles Fishman, “looked more like a butcher forced to wear a suit than a television anchor,” was cast as the show’s prosecutor. Indeed, Fast Company described him as Perry Mason: “a gruff, jowly fellow with a didactic, inquisitorial style, [Haines] is approachable but skeptical—and definitely hard to impress. His mind is as sharp as his physical appearance is, at times, rumpled.”

  In truth, although Haines had a law degree, the inquisitorial manner was not a style that he had honed through years of courtroom experience. Before joining CNBC, Haines had spent roughly 20 years as a local news anchor in Philadelphia, New York, and Providence, Rhode Island. In the eighties he decided to change careers, earning a law degree at the University of Pennsylvania, but then underwent a change of heart. “Law school was great, but who the hell wants to practice law? You gotta spend all your time with lawyers,” Haines complained.12 So in 1989, he returned to television and joined CNBC. Although he passed the New Jersey Bar, he never practiced law.

  Nevertheless, Haines relished impersonating a prosecutor: “My job is to find the negative story. My job is to figure out if you’re lying…. I used to be an investigative reporter, and I’ll make ’em squirm if I have to,” he declared, referring to the CEOs who appeared on the show. “They come in with great confidence,” he added with a chuckle, “but sometimes they don’t leave that way.”13

  Still, when Haines interviewed celebrity CEOs such as Ariba’s Keith Krach, Sunbeam’s Al Dunlap, or Enron’s Kenneth Lay, he rarely seemed to find the holes in their stories.14 Indeed, in Lay’s case he handed him his lines.

  In October 2000, Haines began an interview with Enron’s chairman by announcing, “Enron has the power.” His first question to Lay: “So you are an old economy company using the new economy to great effect?” His second question could have been written by Enron’s public relations department: “I imagine that the additional revenue pretty much goes straight to the bottom line. I mean, once you have got it set up, there is very little incremental cost, right?”

  Haines was almost as helpful when he interviewed Enron’s president and CEO Jeffrey Skilling in April of 2001—just seven months before the seventh largest corporation in the United States filed for chapter 11. This time, Haines began with Enron’s earnings report—“Energetic earnings from Enron…Is Enron en route to greater earnings?” he asked hopefully.

  But before posing that question to Skilling, Haines dropped a quick bombshell: “And in fair disclosure terms, I will say that I own shares of Enron and have for quite some time, more than a year.” (In other words, Haines owned Enron when he interviewed Lay in October.) Without missing a beat, Haines then handed Skilling his cue: “Mr. Skilling, so what is driving your business here? Is it primarily the energy shortage in the west?

  “No, Mark,” Skilling replied. “What’s going on just in general is we have a tighter electricity and natural gas market than we have had really in the last decade. What Enron sells is reliable delivery and predictable price, and so the value of the product we sell is just going up right now.” In truth, of course, what Enron sold was neither reliable nor predictable. What it sold was hype.15

  To be fair, Haines was not cast as CNBC’s investigative reporter. That role was assigned to David “The Brain” Faber. “David Faber likes to think of himself as the Seymour Hersh of financial journalism,” Morgan Stanley’s Byron Wien remarked with a smile, referring to the Pulitzer Prize–winning investigative journalist who uncovered the My Lai massacre in Vietnam.16

  Telegenic, polished, and confident, Faber dressed for success. When asked to name “the best perk of being a TV talent,” he replied, “Saks does our clothes. I go to Saks and someone walks around with me, and I get to pick anything I want.”17 Natty in jacket and tie, Faber served as a visual foil for his sidekick and sparring partner, Joe Kernen: Faber, the urbane hunk, Kernen, in shirtsleeves, the rumpled everyman.

  Faber, who had worked for seven years as a reporter at Institutional Investor’s newsletters, took pride in scooping the competition—especially when reporting on upcoming mergers. Yet, while he often nailed the news, his fleeting television reports left little time for in-depth analysis of why the companies were merging: Would the merger add fundamental value? Or was Company A simply looking for a way to inflate its earnings by “pooling” two balance sheets?

  But reporters who cover mergers and acquisitions quickly learn that if they criticize the deal, their sources may dry up. “If you’re a merger and acquisitions reporter, the reality is that if you scrutinize the deal too closely on day one, next time, your competition is likely to get the tip instead of you,” confided Wall Street Journal reporter Jonathan Weil. “That’s why I would hate to be an M&A reporter. They’re in a tough spot.”18

  Steve Lipin, who covered mergers and acquisitions for The Wall Street Journal, agreed that some sources tried to apply pressure. “In 1996, I helped write a story about how more and more companies were shunning investment bankers ‘going it alone’—negotiating and completing mergers on their own,” he recalled. Needless to say, the story was not wildly popular among the bankers: “I was on vacation when the story ran, and I got a call from one of them.” It was a short message: “‘Don’t bite the hand that feeds you’—Click. But,” Lipin added, “I had to call them as I saw them.”19

  Nevertheless, as the number of news outlets multiplied, “the flood of news forced all media to be more aggressive,” Lipin recalled. “And as a mergers and acquisitions reporter, there was an immediacy to my job. Company A may be buying Y. You don’t want to be irresponsible, but you don’t want to be beaten by the competition either. Do I wish I had been more skeptical? Given that all of the acquirers have blown up and half of them are in jail? Yes. But at the time, when you’re covering daily events, you can’t always sit back and reflect. In retrospect, should we have done more of those reflective stories? Maybe. But rightly or wrongly, we also took our cue from how the market reacted to the deals.”

  At CNBC, Faber competed with Lipin. As a television reporter, Faber’s primary focus was on getting the news first—which can be different from investigating a story. For example, in June of 2002, when CNBC took credit for “breaking” the story of “massive fraud” at WorldCom, the stock was already trading at 61 cents. Fabe
r was the first to report that WorldCom was ready to admit to wrongdoing by restating its earnings, but he did not uncover the financial chicanery that led to WorldCom’s collapse.20

  “That’s the difference between being an investigative reporter and getting scoops,” explained Herb Greenberg, a financial columnist for both Fortune and TheStreet.com, who had been questioning WorldCom’s finances since 1997. “Getting scoops is being a newsperson, a news hound. I’ve done it,” added Greenberg, who had been a beat reporter in Chicago before he began writing his investigative columns. “It’s a lot of fun—it gets your adrenaline going. When you’re an investigative reporter, though, it’s different. Rather than breaking the story that there is an SEC investigation, you’re digging out the stuff that might lead to an SEC investigation.”21

  But Faber concentrated his energies on getting what his viewers wanted—the scoop, not the scandal. When asked why the financial press failed to uncover Enron’s financial chicanery, the CNBC reporter was quick with an explanation. “As a journalist, when you pursue a story, you look for feedback and you look to see what is the response…. When you break a big story, for example, about fraud at a Waste Management or a Cendant or a Rite Aid or an Oxford Health, the response wasn’t necessarily as encouraging as you might have expected.”22

  Jeff Madrick, a financial columnist for The New York Times and frequent contributor to The New York Review of Books, challenged Faber’s explanation: “I don’t think it is a good enough defense to say we weren’t encouraged by our audience when we reported on these events. They didn’t like it. That’s the very point,” said Madrick. Of course investors did not want to hear that a company they owned was cooking its books, but they needed to know. “I don’t think there was ever a golden age in financial and business journalism,” Madrick added. “But I think once business journalists looked on themselves as public watchdogs. They were skeptical by nature…. What happened to journalism somewhere along the line, I think more so in TV, but certainly in print as well, is that they began to worry about the readers’ reaction, the audience’s reaction, the corporate reaction.”23

  But on television, at least, ratings were all-important. So, perhaps inevitably, David Faber became an investigative reporter with one eye on the applause-o-meter.

  While Faber tracked mergers, Joe “The Big Kahuna” Kernen specialized in explaining medical breakthroughs. CNBC’s stock editor had earned a master’s in molecular biology from MIT, and his colleagues often referred to his degree when asking him to explain a pharmaceutical breakthrough or a new biotech product. Even CNBC’s website made a point of mentioning that after receiving a B.A. from the University of Denver, Kernen spent two years at MIT, where he “worked on several cancer research projects.”

  As it turned out, just as Haines had never practiced law, Kernen never became a scientist. After leaving MIT, he spent nine years as a retail broker, at E.F. Hutton, Lehman Brothers, and Merrill Lynch, before joining CNBC, making him perhaps the only cancer researcher to wake up one morning and say, “I’d rather be making cold calls.”

  “I made hundreds and hundreds [of cold calls] a day,” said Kernen, recalling his career as a broker.24 He offered this partial explanation for the turn in his career: “In my last semester [at MIT] I got a C,” he confided, “because I was too busy playing the stock market. My dad gave me $5,000 and a guy turned me on to options trading. I was bitten by the bug.”25

  As CNBC’s stock market editor, Kernen sat just off the main stage, surrounded by seven computers in a set that vaguely resembled an airplane cockpit. There, he tracked the market like a bomber pilot: “What’s up? What’s down? What’s moving today?” As CNBC’s day progressed, Kernen hosted a segment called “Winners and Losers,” highlighting any stock that had moved up or down by more than 2 percent.26 Since most of CNBC’s guests advised investors to buy and hold for the long term, it was not clear how Kernen’s report that an obscure company was up by 2.5 percent at 10 A.M.—or down by 2.5 percent at 2 P.M.—served his viewers’ financial interests. But how else could a financial news network hope to fill 14 hours of airtime, day after day, week after week, for 52 weeks a year?

  The fact that Kernen worked in shirtsleeves, his tie loose, his hair slightly disheveled, added to his credibility. Matt Quayle, the show’s 30-year-old producer, hit upon the format by accident. One morning, Kernen showed up so late for work that there was no time for him to take his place on the main set. Instead, the camera had to cut to him at his desk. His jacket was off, his hair was askew, and he was reading from his computer screen. “We were, like, wow!” Quayle recalled. “The perception was that Joe was reading news as it was actually happening.”27

  In fact, nothing was happening. The market had not yet opened. But CNBC was based on the illusion that something was happening—every minute. Don’t touch your dial—your financial future hinges on what happens next.

  Clearly, the only way to keep listeners riveted to the screen all day, five days a week, was to focus on the speed of the game. Should you have a hard time keeping up, Fast Company assured investors, the network offered “a charming and instructive tape on how to watch CNBC, narrated by Jeopardy! host Alex Trebek. The tape was titled: ‘Watch and Make Money.’”

  Little wonder, by the mid-nineties, a survey showed that when Americans were asked what role investing played in their lives, the majority labled investing “recreation.”28

  REPORTING IN REAL TIME

  By 1996, individuals were putting an average of $25 billion per month into stocks, directly or through retirement plans—equivalent to nearly $100 per citizen.29

  As public enthusiasm grew, so did the public appetite for financial information. The media met the demand. Electronic news was coming into its own. Six years earlier, Michael Bloomberg created Bloomberg News, an online financial news service designed to compete with Dow Jones and Reuters; by the mid-nineties, thousands of chat rooms, financial websites, and bulletin boards had come online, all vying with the news services for investors’ eyeballs.

  To compete in this high-speed Age of Information, print journalists needed to learn how to write “in real time.” In 2001, Dave Kansas, a Wall Street Journal reporter who went on to become editor of TheStreet.com, described the challenge in a piece that he wrote for The New York Times: “While the Internet has secured its position as a legitimate news medium, there are reasons for concern. The biggest may be speed…. People want news faster than they did ever before…. By requiring a writer to show his or her hand earlier and earlier, the Internet has helped expose the raw nature of the news-gathering process. And often, that early hand is imperfect….

  “Historically, print reporters have looked down on their broadcast cousins with modest disdain,” he acknowledged. “The distillation of complex issues into a 30-second broadcast report makes the print journalist think electronic journalists lack analytical heft. But this disdain can make it difficult for the print people to appreciate the most important skill an electronic journalist possesses: real-time decision making.”

  Kansas got his start in journalism at the NBC Radio News network, and “when the hourly newscast started, it started,” he recalled. “Decisions had to be made by the time the light came on. In print, the deadline is seldom as immediate. Ideas can be mulled and debated.” But the line between print and electronic journalism was blurring: now everyone was becoming part of “the media.” Many newspapers published an online edition, and print journalists had electronic responsibilities. As a result, Kansas declared, “Print journalists involved with Internet distribution must learn to fuse their traditional strengths with the skill of real-time decision making.”30

  In the end, Kansas suggested, the responsibility lies with editors to balance priorities: “Print journalists face many more pressures than 10 years ago—the drumbeat of news is more intense, and a lot of the pressure is driven by the public being eager to get news as quickly as possible. But while you have to cover the news as it occurs—and break t
he stories—editors also have to have the discipline to pull reporters away to take the longer look.”31

  Yet, as print journalists raced to keep up with the immediacy of electronic news, many began to narrow their focus to blow-by-blow reporting. The pressure to compete in real time could be felt in stories that mimicked the pulsing, telegraphic rhythm of the Internet: “How much did the market rise today?” “Why?” “Where is it going tomorrow?”

  “The trouble is that investing doesn’t lend itself to play-by-play reporting,” observed Bill Fleckenstein, a Seattle hedge fund manager. “Speculating does, but investing doesn’t.”32

  For the investor, what matters most is the primary trend, not the market’s day-to-day action. “If you stand on the shore and gaze at the ocean it’s impossible to tell, at any given moment, whether the tide’s coming in or going out,” Richard Russell told his readers in 1995. “By the same token, watching the action of the stock market on any given day, it’s equally difficult to determine whether it’s a bull or a bear market. But the fact is that the tide of the market is always either coming in (a bull market) or going out (a bear market). It’s the determination of the major trend which is so difficult. Yet that determination is critical.”33

  Nevertheless, as financial news became more immediate, “scoops” of all kinds tended to replace analysis that looked backward and forward in time. The spotlight was on the moment. The bull market’s rise was presented in the context of no context. To many investors, history seemed unimportant. Sometimes a magazine would print what looked like a lengthy timeline unfolding across the bottom of two pages. But closer inspection would reveal that it tracked the market for, perhaps, three years. Occasionally, a story included a chart that looked back to the sixties, but for the most part, a timeline meant to show the market’s history went no further back than 1982—leaving the bull market in splendid isolation.34