Why Cable Business News Will Push Your Investment To The Ground : Where I used to work, we played MSNBC, CNBC, and CNN Business in the background non-stop. Every market movement relevant to the energy market is followed, analyzed and regurgitated on the channel.
For the oil trading desk where I work, every threat of an Iranian oil embargo, every possible piracy off the coast of Somalia, every Nigerian riot, will send traders away in a flurry of activity.
Back in 2007, oil was trending to infinity and beyond, and everyone was in a good mood. I don’t know about now. But what I mean here is, this type of reporting is good and useful.
For a merchant.
But you’re not a merchant, right? You don’t trade Forex or options for a living, do you? Because if you are an investor – and I define an investor as someone who holds investment instruments for the medium to long term, then OFF TV. They are worse than useless. They are very detrimental to your investment portfolio.
Business reporting business, like ordinary media, like a stage. There is a cast of characters. They played their part to a T, and they didn’t improvise. The network itself is a self-serving media engine powered for one reason and one reason only: to make a profit. The next time you see Maria Bartiromo, Erin Bennett or Becky Quick, you need to know who’s paying their bills.
Advertisers, usually financial services companies who fill this 10-20 second slot right after they tell you they will be “back soon”. And who do they return to after the commercial break? Oh didn’t you know, it’s the internal economist/strategic/analyst of those companies.
Do you see what I see here? I see an irreconcilable conflict of interest. I see many guests coming to the event with a very clear agenda to promote a certain style of investing, a sector in which they are experts (and happen to be doing business).
His intentions aren’t necessarily malicious, but it does give a bit of a gag command to the interview itself. After all, if a dispute arises, how far can an anchorman continue to challenge the position of their guest, knowing full well that their spouse is paying part of his salary.
And then there are the anchors that have you scratching your head. These are the personalities who would be better off working the Chicago Options Exchange hole. Because they seem to screw up their responsibility to cover useful business and economic analysis, by pulling hourly trading tricks off the hat.
Lastly, there are the experts themselves. Now considering these are rational and intelligent analysts and economists who have swam against the tide and are now finally justified. They came to the event with a few things to sell.
What happened? First, there’s good research showing that (more often than not) no, one year of right view is usually not followed by another. So statistically speaking, the famous genius you are watching on screen will probably be wrong in whatever he stands for right now.
Second, the problem of ego. Imagine if you were an academic who had been writing a paper about some obscure anomaly in the market or impending doom for years, floundering in relative obscurity.
Proven suddenly, exalted to rock star, touted on cable news as a sage, paraded through conferences like a peacock, what effect does this have on the egos of ordinary people? They may be geniuses, but they are still egocentric like everyone else, right?
Then it is easy to see how they can be influenced by the newfound fame, attention, influx of respect and adoration. Not wanting to disappoint, or simply being driven by stubbornness to keep being right, it’s no wonder that success in market predictions is rarely repeated, year after year.
So with all of this: Conflicts of interest, confusing role play, driven by giant egos. Wouldn’t it be better if you turned off the cable news? Take FT or WSJ, learn classic investing. There is more than enough sense out there to keep your money safe.
The Investoralist is a blog that explores the basic principles of investing in today’s media-obsessed, amnesiac and voice-driven world. Instead of focusing on the technical aspects of securities analysis, we try to uncover the confluence of factors that have frustrated and confused many investors, and provide meaningful discussions based on a holistic view of the macro-investing environment.
Investoralists emerge when founders tire of the inaccurate, irrelevant, and often contradictory information that business media networks provide. As a passive investor himself, he feels underserved by the one-sided and microscopic analysis that leads many investors astray.