January 17, 2018
Financial News Media is in the entertainment industry and the creators, producers, writers, and the actors are not in that industry to inform anyone how to invest or make investment decisions. The primary goal of these entities is to generate higher ratings so their sales’ teams can then use those ratings to price and sell more profitable advertisements. Achievement of this goal pays them all a nice salary.
There is nothing wrong with their business model, I believe these organizations make a decent return for their efforts and the actors/reporters make a decent living doing what they do. They are certainly entertaining and if you view them in that light then you surely will get your money’s worth. A few of the print media sources create some decent reading and they are easier to ignore the ads. The televised broadcasts are visually entertaining and can offer up some information around earnings season. Their sets, by the way, are designed to look like pre-game football sets that show activity and action with numbers and graphs popping up all over the place. There are even “experts” who forecast future market results with as much flare as football analysts predicting the winners of the NFL schedule that week. Unfortunately, with the same dismal records of successful predicting.
This is not our good ole Wall Street Week with Louis Rukeyser. This is excitement writ large with video-game-like lights, movement, and drama. Never forget though, this not a good place to get your investment advice or ideas.
For example; Friday, December 22, 2017, CNBC posted a headline, “Investors yank billions out of market following Trump’s tax bill win.” Just the kind of headline that makes one wonder what those investors know, that we do not? Are we missing something? Will the last investor please turn out the lights when they leave? Billions are being yanked from the market! We look at that headline once, twice, three times, and in the end, our curiosity wins out and we click on the article to see what we are missing.
When it opens there is the standard photo of the NYSE trading floor with a few (three in this case) floor-traders staring in disbelief at their trading terminals. As if to say, where has all the money gone? (By the way, these are stock photos—who knows when they were shot.)
Anyway, shortly after this not-so-Pulitzer-prize winning article appeared, an astute media watcher sent an email pointing to a suspiciously similar CNN article in which the headline read, “Investors Yank $150 Billion from Stocks for the 3rd Year.” This one is laughably dated December 27, 2012. That’s right, 2012! As in 11,800 DOW points ago. Or 1,478 S&P500 points ago. About the exact worst time to leave the market.
In both articles, the reporters point to esoteric reasons why investors are fleeing a scary situation. Incidentally, investors in these articles are always scared. These reporters are highlighting bad investor behavior with the implication that perhaps, you do the same thing. Well, it does not take a mathematician to figure out that the $150 billion yanked from Stocks in 2012 would a lot more today if they just left it in the market. As in almost twice as much.
Just as I would assume that the Investors who yanked the money out of the market following the tax-bill passage will be a bit disappointed in their returns on that money five years from now. Maybe they are already kicking the dirt about missing the 1,120 some points on the DOW and 75 or so on the S&P 500.
The point is this, the financial media is just like a pre-game football show. It is entertainment. It is not an investment policy. Shifting around money based on what the actor on the TV show says, or the writer crafting a clickbait article headline is not an effective way to secure a safe, and boring financial future. I feel like maybe I have beat this drum a bit too often and I promise this will be the last one on the foolishness of the financial media for some time.
