Sometimes, CNBC goes too far in trying to represent "both sides" of an issue - like when Scott Wapner put himself in the awkward position of defending taxpayer handouts to corporations that blew all their own money on stock buybacks.
It happened against during Monday's episode of "The Closing Bell", when co-host Wilfred Frost became the latest to lose his cool on air during an interview with Muddy Waters founder Carson Block - inadvertently offering Block a golden opportunity to tease his firm's next big short on twitter, instead of CNBC where it could have drawn far more eyeballs (and ad revenue).
According to the Muddy Waters Twitter account, the firm will release its next big short on Tuesday.
MW will release a new Short tomorrow pre-market. It’s a “company” that’s a complete stock promotion and makes $NKLA look like Microsoft in comparison. Shockingly the sell-side is positive on it. Would love to hear @WilfredFrost try to explain that away tomorrow.— MuddyWatersResearch (@muddywatersre) September 21, 2020
Block, who built his reputation by uncovering fraud and shorting Chinese companies trading in the US, was brought on to discuss the disaster at Nikola, when the discussion suddenly veered off course.
After answering a few questions from Frost's co-host Sara Eisen, Block was prompted to broaden his criticism after being asked about the sell-side analysts standing by Nikola. Block implied that sell-side analysts might be guilty of securities fraud, if it wasn't for companies' "safe harbor" statements.
Expanding on this, Block explained his low opinion of sell-side research, claiming "they're a highly paid dating service for institutional investors...the way that they really add value to the world - to the extent they do - is by arranging meetings between institutional clients and management. And it's no secret that if an analyst isn't pretty bullish on a company, most companies won't allow the analyst to arrange the dates, and so that analyst is shut out.
Then came the punchline: when talking about stocks, sell side analysts "should be taken about as seriously as your 5-year-old kid".
Frost was seemingly taken aback by this last comment (his seemingly genuine indignation reminded us of another classic CNBC moment that unfolded earlier this year). Responding with a hint of agitation, Frost insisted that he didn't really appreciate that characterization and assured his audience that many analysts are "highly trained."
"I think that's completely wide of the mark even though at times there are examples where they do get things wrong," Frost said.
"It's hard for me to let that one lie Wilford," Block said.
Frost doubled-down, resolving to bash Block with his call to short Tesla.
"Have you gotten every single call you've made absolutely right? Well have you?"
To this, Block replied that he has "about as good a batting average as anybody does on the long side...but I've been doing it on the short side during the biggest bull market of your generation. So maybe you can cut me a little slack."
Then, the short-seller went for the jugular: "You're the one who pushed back when I said Elon Musk was committing fraud...and then he settled with the SEC...do you actually read anything Wilfred...I know you're a good looking guy with a British accent, but what do you read?"
Frost responded by throwing Block's Tesla call in his face: "You're the guy who told viewers to short Tesla, then Tesla stock soared."
Then, Frost touched upon what just might be the true motivation for his anger: Sell side analysts are hard-working people and "a lot of them come on this network and give up their time to do so," Frost said.
Of course, practically everybody on Wall Street knows showing face on CNBC is literally part of the sell side analyst's job description. But Block kept pushing, doubling down on his critique of sell-side research: "It's largely toilet paper, there's occasionally a sell-side analysts who are willing to go out a limb and say something unpopular...but they're a dying breed."
As Frost stammered out a response, Block added "Do you understand that about Wall Street? That's just baffling."
Of course, Block has a point.
For the record @muddywatersre is right: most sellside research exists only to provide access to management. Nobody would pay banks solely for "research" which is 70% buy /25%— zerohedge (@zerohedge) September 21, 2020
hold /5% sell. Just ask sellsiders who are trying to sell their insights post MIFID
Sellside organizes conferences where buyside traders only get invited if they meet soft dollar quota. Once there mgmt and buyside has private one on one sessions exempt from compliance oversight where inside information is openly shared— zerohedge (@zerohedge) September 21, 2020
Those who understand this should also understand that for professionals, there is no "random walk down Wall Street".