Buffett Buoyed the Market? Don't Buy It

I'd like, in fact I even try, to give the business media more slack on their explanations for market movements, but days like Tuesday make the Business Press Maven feel mortally wounded... so forget it.

Unless the market is up or down by a substantial percentage, the Business Press Maven normally just snoozes through such coverage, all but ignoring it. But Jeffrey Linderman, a reader and former RealMoney.com contributor, called my attention to yesterday's train wreck, rousing me from my slumber. It provided a perfect example of why the savvy investor should avoid dependency on what's-moving-the-market commentary, and instead let it slip in one ear and out the other.

The market was up a hair over 130 points Tuesday. The first key here is that we're working off a base of more than 12,000, so that 1% gain is close to rounding error territory. Separately, Warren Buffett, Wall Street's resident genius, offered to reinsure close to a trillion dollars worth of municipal bonds, many issued by MBIA(MBI Quote - Cramer on MBI - Stock Picks) and Ambac Financial Group(ABK Quote - Cramer on ABK - Stock Picks). The two occurrences were framed as effect and cause by most of the business media, which almost always falls for the notion that if A happened and B happened and C happened, then A and B made C happen.

But how flighty and flawed was the reasoning in this case?

Well, both MBIA and Ambac were down by more than 15% yesterday. So, um, let me try to get my pretty little head around this -- the stock market was so excited that Warren Buffett was going to save municipal bonds, essentially the least of its worries, that it went up one whole percent, while taking the companies Buffett is throwing the lifeline to down 15%.

Funny thing is, you can always tell when story lines are forced and reasoning is running off the rails. That's because in the offending articles (and the business media is littered with them at this moment) you can spot the verbal contortions a mile off. Savvy investors are advised to look for such gymnastics in market movement articles (and all others).

The New York Post all but pressed for sainthood for Buffett, crediting him with a worldwide rise in stock prices while, interestingly enough, allowing that he put up a "relatively measly $5 billion in startup cash." But guess what? The plunge in prices of MBIA and Ambac is not even mentioned. Not once. Instead we get an unequivocal headline: "BUFFETT'S BOND PLAN GIVES MARKETS A LIFT"

And that was followed by a lead that makes that attempt at canonization: "Warren Buffett rode back into Wall Street as a long-absent white knight just in the nick of time."

But then we get a peculiar nod to the fact that, in the grand scheme of global financial prices, he did not do much, complete with crediting him for doling out "optimism," which like a "psychological lift" is the sort of fuzzy verbal turns you get when the theme of the writing does not match the reality of the numbers: "He managed to pledge a relatively measly $5 billion of startup cash and parlay it with great optimism..." the Post said, before segueing back to handing him credit with a ladle: "to rally markets out of their credit-crunch gloom and boost the broad value of shares here by more than $1.1 trillion."

About that great optimism and rise from credit-crunch gloom? You know, the stuff that made the market rise all of 1%? Well, look how CNBC allows in this headline that it is "minor" news, while still claiming it "buffet"-ed stocks: "These Days, Even Minor News Can 'Buffett' Stocks

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