NBC coined the slogan “Must See TV” nearly 30 years ago to promote its Thursday night lineup of prime-time sitcoms. From Seinfeld to Frasier, each show effortlessly connected with viewers by highlighting the inextricable frustrations of everyday life in an over the top fashion. In fact, some of the best shows (my opinion) fed into major societal, finance and political themes that traditionally dominated the newsroom. For example, Roseanne found instant success for its brutally honest portrayal of a working-class family struggling with weight, relationships, and money.
Similar connections have been established by other popular sitcoms; Cheers, Seinfeld and Frasier each dedicated an episode to financial markets that closely paralleled the prevailing financial and economic conditions in the United States.
Norm raises the finance bar
In late 1986, Cheers aired an episode centered on buying and selling stocks. Norm claims to have inside information on a new combination laundromat and tanning salon opening in the area (somehow they foresaw the GTL craze). “It’s the ultimate marriage of luxury and convenience”, according to Norm, who had a hot hand for picking winners. The accountant turned somewhat financial advisor doubled his client’s account in 6 months with shrewd investments in mutual funds and biotech stocks.
Everyone but Woody saw this as a green light to pile into Norm’s stock. By doing so, the group fell victim to some common investing and behavioral traps like the representative heuristic and bandwagon effect. The truth is, Norm’s recent success doesn’t demonstrate a consistent ability to outperform the market. Woody, on the other hand, makes the prudent decision to, “never spend venture capital on a limited partnership without a detailed analytical fiduciary prospectus.” The Tan’N Wash eventually folds after heavy snowfall caves in the roof but not before Sam and the gang exhibit more biases.
This same exuberance towards the Tan’N Wash echoes some real-life trading behavior at the time. With the economy well off their 5-year lows, the Federal Reserve looked determined to raise its key interest rate. The market ignored these signs and continued to drive stocks to higher without a commensurate pullback. The combination of central bank easing and rapidly rising equity prices came to a head in October 1987. Black Monday thrashed the Dow and other major market indexes for the largest single-day percentage loss in history. The event changed how finance professionals and even entertainment viewed the stock market. In later seasons of Cheers, Norm tells Woody that the market and economy are largely manipulated, a view shared today by millennials after the 2008 Financial Crisis.
Common investing biases stifle Jerry’s gains
Four years later, Seinfeld aired its own stock picking episode. The episode saw George and Jerry display many of the same biases as Cheers but with an underlying sense of self-doubt rooted in the series. (Note: In a previous post, I take an in-depth look at the investing lessons and behavioral challenges covered in the episode. For that reason, you won’t see additional comments on the episode itself)
During this time, the economy was trying to regain its footing. A spike in inflation between 1988 and 1989 pushed the Fed to raise rates so high it restricted credit to the already weakened economy. This triggered a sharp dip in GDP growth, job creation and seemingly propelled the economy into recession. Perhaps, the ongoing headwinds influenced George and Jerry’s negative attitudes toward money and investing.
Niles outsmarts the stock market?
As the economy stabilized, Frasier took a stab at the market in 1995. Niles begins boasting about a stock tip from his new broker Wendell. “Every stock he puts me on to pays off,” says Niles, “He’s clairvoyant”. Of course, Daphne bites when she hears this and takes a sizeable investment in Vectorcomp Software. Here is another incident of the representative heuristics—the tendency to treat recent events as indicative of a larger trend. However, Wendell manages to buck the trend and extend his hot streak. Vectorcomp Software jumps 40% overnight, leaving Daphne with a $200 profit on her initial $500 investment. After reinvesting their profits, Niles reveals to Frasier he was running a reverse Ponzi Scheme by paying Daphne extra gains from his own pocket.
The episode aired on the heels of one of the largest bull markets in modern history. In 1995, investors were feasting on technology standouts like Microsoft and IBM but also risky, fundamentally flawed tech startups. The fictional returns of Vectorcomp Software mirrored the excessive speculation and sharp movements happening in the tech sector. This behavior persisted for 5 more years before the dotcom bubble burst and cut the entire market in half.
Some of the best moments in TV history were not only entertaining but also a lesson in economic and market history. By tying entertainment to past and contemporary issues, investors of all skills can learn to make more efficient decisions.