The secret realm of business TV
The Sensex had a nervous breakdown, the stock market lost control of its sensex, sorry senses, and business TV channels needed immediate medical attention, to say nothing of their madcap, sorry midcap (whatever) anchors who until the afternoon of Monday February 10, 2008 had expended considerable energy recommending, but not precisely recommending but perhaps recommending, nevertheless, Reliance Power to TV customers, only to see a currency outage (forgive the pun).
The charm of business TV anchors is that they often give ‘stock’ advice to investors seeking to invest or sell, in a jargon which says ‘uh’, knowing they have recommended nothing they can be held accountable for. For example, at least one influential business TV anchor, in his newspaper column last Monday morning, "guess"d that Reliance Power shares would "possibly settle around Rs 500-550 in the near term". Guess? Possibly? Near term? We’ve heard of hedge funds (sorta) but this is called hedging your bets so carefully, the investor was wiser before consulting him. However, viewers tend to trust such equivocal advice, take it at face value and act upon it. Oh, by the way, Reliance Power closed at Rs 372.50. Guess in the nearest term, you possibly suffered considerable losses.
Yesterday, after Reliance Power offered bonus shares to soothe the market’s and investors’ hurt feelings, the anchors were more circumspect, weighing their words as if choosing between a death or life sentence — well, there will be short term losses, long terms gains... But the damage had already been done.
The TV business media belongs to a secret cabal where they observe certain codes of conduct only they follow, with impunity. They don’t have to reveal any interest they may have in a particular venture or from the investor’s point of view, stand by their word — you do, if you can fully understand them. Therefore, to "profit from it", the viewer/investor must already know his or her business — in which case, why bother? Otherwise, you receive authoritative (and perhaps insider?) but unclear and at-your-own-risk advice on whether to buy, sell, hold in the short term, sell in the midterm and shift to techno in the long term depending on profitability, purchasability, the state of the decline ratio...
Our expert advice: the media must heed outgoing SEBI Chairman M. Damodaran’s warning against the ‘anchor-investors’ (NDTV’s Walk the Talk). Will they, or must they be forced to?
shailaja.bajpai@expressindia.com
The relevant portions of SEBI Chairman M. Damodaran’s interview with The Indian Express Editor-in-Chief Shekhar Gupta on NDTV 24x7’s Walk the Talk,published in the Indian Express,
• When you were on Walk the Talk last time, a few months after you took over, you had said one of your challenges was to bring the aam aadmi to the stock market, convince him it’s not a casino. And we had one aam aadmi on TV the other day, the day Reliance Power opened, saying he felt like slashing his throat. What do you tell that investor?
I think what such investors need to be told is or need to be asked is, and they need to ask this themselves: Did you ask the right questions before you put your money there? Were you taken away by the hype? I got a letter from an investor, it’s addressed to somebody else, saying I saw you guys saying everything was good about a particular issue — till it listed below issue price. Now I find you saying everything wrong and talking it down. What happened to you guys? I think people need to look whether there is genuine expertise in those who give advice or is it agenda-driven advice.
• Is that adviser in this case the media?
I think the media has a very large role to play, and I’m afraid that role is not being played to the best of its ability.
• Let’s elaborate on that. . .
Take the electronic media. There are people who make statements which are a clear indication of talking up or talking down stocks. And what do we have by way of investor protection — a disclosure, which says this person is having a position in that stock. Earlier we had statements like not really, may be, is likely my clients have nothing in particular. We moved away from that. Today you get a broad spectrum: it is entirely possible I have this. Is this disclosure? It is clearly not. I want to know before somebody gives me advice, are you giving me advice because you are going to benefit?
• There is another question, it’s not something to say I have it or I don’t have it. I have a position in this stock or not. But I think a large disclosure would be: am I going to have a position in this stock or not. Because I know I am talking it up (and) I could buy it today.
Ideally, I would like a situation where, at the beginning of the programme, I know it might not be media-friendly in terms of excitement, if somebody says we are going to discuss these five stocks, and these two persons who are in your studio have these exposures, so that while he is talking I can look at his face take a judgement call on whether this guy is pushing up a stock.
• So you think this disclosure portion is too routine.
I think it’s far too routine . . . disclosure has to be complete, you make it to the right audience, not the TV anchor. It’s the investor who is going to put his money. Filing disclosure is not enough.
• Do you think these people have been driving up the market or driving down the market?
Well, let me put it lightly. When we heard the term ‘anchor investors’ first, I thought anchor investor is the guy that brings in a lot of money initially into a project around whose reputation others invest. I am beginning to believe, at the end of my three-year-tenure, that an anchor investor is an anchor and investor put together. I am worried that (they are) those who are responsible. . . who take the message to a billion-plus people who will hopefully, one day, be interested in the market. If that message gets distorted, what happens?
• Have you taken this up with media leaders, owners, editors, writers.
My predecessor and his predecessor had meetings with those from the media. The first time they were told we will write out our code of conduct. It was left to them. Maybe they have an in-house code of conduct. We didn’t see anything in the industry. My immediate predecessor, I am told, offered to write it out himself. I don’t think there was much response or too many takers. We hope we would be third time lucky by individually engaging people. There have been some improvements. Not that we want to take the credit, but maybe over time improvements will come. Disclosures we referred to had got that much better than I think it was previously.
• But you would think strongly that the media, particularly senior media people, editors, anchors — they need to have a strong code of conduct now?
I think there ought to be a code of conduct for media houses; not that we need to go public with it, but you need to make a statement that we have a media code of conduct. And more importantly, I think, you need to see leadership in the business of disseminating correct information.
• Because, if these correctives are not put in place— disclosures are one thing, but also strong codes of conduct, as in other capitalist systems like the US, for example— do you expect a backlash? Or do you expect government or regulators getting tempted to interfere?
That’s the worst thing that will happen. We are the best people to write our code of conduct than somebody else. Self-regulation is, I think, the best form of regulation. But self-regulation doesn’t mean absence of regulation. It doesn’t mean a situation where everybody says, leave me to myself, I know what’s right or wrong. Let people sit together and evolve a code of conduct.
• Let me push the envelope on this. Did you find some credible evidence or indication that some senior people in the media were actively playing the market?
Well, even if I did, I’m not going to share it with you . . . certainly it was not the question of playing the market. You don’t have to play the market, I don’t have to play the market. The question is whether I am talking up something, whether I am talking down something.
• (In recent months) you were attacked by almost all the financial media. I call this the age of pink-paper triumphalism: everything has to go up all the time. Anything that comes in the way is the enemy of new capitalism. You were attacked when you were seen putting some obstruction or some speed-breakers in the way of IPOs, preferential allotments, institutional investors.
Well, we did, I am glad you asked this. In August 2005, we said we will do away with the discretionary allotments. All of them came down on us like a tonne of bricks saying you will drive away institutions from the markets. We were told these are quality investors, you need to give them discretionary allotments— institutions, foreign institutions. When we said we got evidence that these guys too sell on day one, we were told by these people they will stay in the long term, we need to give them more. Today those same people who criticised us are out there in print saying, we should not believe that these people don’t flip. . . My question is, why didn’t somebody take us seriously two years ago?