Markets

CNBC plunges as indexing soars

By Allan Roth

July 8, 2013 / 9:51 AM EDT / MoneyWatch

Commentary:

(MoneyWatch) Active mutual funds aren't the only casualty from the surging popularity of index investing. According to Vikas Shukla of ValueWalk.com, CNBC viewer ratings have fallen to the lowest levels since 1994 in the all-important age group of 25-54.

The two programs with the largest rating declines in this age group for the second quarter of this year, versus the same quarter of 2012, are Jim Cramer's Mad Money with 50 percent, and The Kudlow Report with 60 percent. Total viewership reflects less of a decline at 39 percent and 40 percent respectively.

Clearly, the entire decline isn't attributable to the rise of indexing: ValueWalk notes that Fox Business ratings have increased during the same period. The report also reveals that a leaked NBC memo touting the network's successes doesn't even mention CNBC, formerly "one of the centerpieces of the NBC/Universal empire."

My take

Now it will be no surprise to any of my readers that, based on financial ideology, I've been a consistent critic of the network, especially Mad Money and Cramer's often costly recommendations. His flip-flopping on Hewlett Packard recently, which swung from sell-sell-sell immediately to buy-buy-buy after a 119 percent gain, gave me whiplash.

But Cramer may have actually made a very good call last week. While appearing on the show Squawk Box, he said something to the effect of "if doubling your money over ten years were as simple as buying the index, you wouldn't need shows like ours." Well, to be exact, the Vanguard Total Stock Index Fund (VTSMX) more than doubled over the past ten years -- it rose 113.9 percent.

In my view, the surge of indexing and decline in CNBC ratings is good news for investors working to achieve financial independence. And though I have my own opinion on whether investors "need shows like ours," CNBC and Jim Cramer are here to stay, which is also a good thing -- for indexers needing markets to remain efficient.

Author's note: My thanks to Jack Otter, former MoneyWatch executive editor for making me aware of the ValueWalk.com article.

Allan Roth

Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.

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