The Stock Market and the Media: Turn It on, But Tune It Out
by Dick Davis
Investors are faced with a daily barrage of business news. There's keen competition over who can break the story first. The clear inference is that the news matters—that keeping abreast of the news, especially as it relates to one’s holdings, is one of the keys to investment success.
I disagree. I believe one of the worst things that can happen to a long-term investor is to be instantly and totally informed about his stock. In most cases, spot news fades into irrelevance over time.
In this article
- The Media's Mis-Focus
- But Why Today?
- Non-News News
- The Media Spin
- The Media Wears No Clothes
- They Report, You Decide
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What’s relevant is what the market decides to do. The news follows the market, not the other way around.
The Media's Mis-Focus
One big challenge faced by individual investors is dealing with misleading information. The financial media’s inept handling of news is a constant irritant to me. Perhaps I’m overly sensitive because, unlike most business reporters, my background is in stocks, not news.
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Discussion
The author is correct. In addition, the news media analyzing data regarding stocks is 99% focused upon short-term likely moves, unable to take a separate look at long-term factors that should be of most interest to long-term investors - like $1.4 Quadrillion derivatives, 150 to 289 Trillion dollars of US 30-year debt, the likely decrease in value of US dollar, death of the Euro, likelihood of worldwide economic collapse, etc. Media analysis is aimed at day traders. Long-term negative issues are hustled off stage ASAP, as sponsors would be adversely impacted, and media people are unable to come to grips with implications of known large scale negative future issues, and don't know what to say.
posted about 1 year ago by Arthur from Florida
Read Dick Davis's book sited above. When you are finished, read it again.
posted about 1 year ago by Kathleen from Pennsylvania
I agree that the daily market commentary is as this article says - as they have to say something they tie it to recent events which really have nothing to do with the markets movements.
posted about 1 year ago by Gerry from Maine
Yes, read the book mentioned above. He does advocate holding 80% index funds and the remaining 20% is self managed funds etc. Looking at the survey of AAII members on index funds, a high majority of members do not hold much in index funds if any at all.
posted about 1 year ago by Dennis from Michigan
I am disappointed that Mr. Davis uses one bad PBS incident to make his point. He should have used the many CNBC shows which have misled investors with hundreds, if not thousands, of flawed "advice". And I am not only talking about the guy who wants to "educate and entertain you", Jim Cramer.
posted about 1 year ago by Joshua from Hawaii
Having been in the industry long enough to gain some insight into why the market acts as it does (irrationally, in the short term), I agree wholeheartedly with Mr. Davis. It used to be a daily game in my office to try to guess what the in-house "expert" in market movements would say on the evening news. He had to say something, because "No-one knows!" just doesn't work in radio or TV. And it's something you definitely don't want your clients to hear you saying.
posted about 1 year ago by Arther from New York
Couldn't agree more with the author. I think you can make the case that ALL media including the news media operates just as the financial media.
posted about 1 year ago by Douglas from Oklahoma
