Own Your Future – The Media, Your Investment Enemy.

Clients who have worked with us for many years know how we feel about the media. They are mainly attention-seeking, eyeball grabbing businesses looking to generate headlines in order to make a profit. They alone can’t be blamed for their portrayal of the news, nor can or should they be complimented. They are businesses and institutions vying for corporate profit, and, as a shareholder of one of their companies, you would encourage this strategy.

The onus is placed on the consumer to sift through the information: factual or fake, exaggerated or not, important or unimportant, or useless versus useful.  Exaggerating the unimportant, useless, albeit factual information is purposely misleading those watching or reading. Ultimately, consumption of this news leads to extreme emotions, whether fear, greed, or happiness (but happiness is rare).

For the average viewer or investor, there is one particular area of concern – speculation. Remember speculation is another word for gambling. As we consume non-economy related media, we often hear pundits speculating on outcomes of political races, criminal trials, sporting events, and extreme weather. When we consume economic related media, we often hear ‘experts’ speculate on interest rates, inflation, the trajectory of the dollar or the market, and the effect of politics on the domestic and global market. For information to be relevant it must be both (1) important, and (b) knowable. Each of the topics mentioned above are not knowable, but rather each speculative.

Speculation

If you take one thing away from this article, it should be this: A cornerstone for rational decision making is an unbiased appreciation of uncertainty. Generally, this is not what clients want to hear, as quite often, they would rather you act on pretend knowledge. We don’t act on pretend knowledge as that leads to speculation and gambling.  We appreciate, especially in these extraordinary times, that there is great uncertainty in the short-term. Long-term we continue to believe in capitalism and global economic expansion. It is hard to focus on the long-term when the media creates short-term distractions.

Not every stock market movement can be explained by recent events, whether political or economic. When you hear the media explain market movement due to specific news of the day, remember it is frequently incorrect. It is only extremely rare events, like 9/11, or early days of pandemics, that can be the sole cause of daily market fluctuations, and even these rare events don’t explain long-term trends – only corporate earnings determine long-term market trends.

Always remember, the media is not there to provide advice, they are there to entertain.