Where I used to work, we rotated MSNBC, CNBC and CNN Business in the background non-stop. Every market movement relevant to the energy market was followed, analyzed, and regurgitated on those channels. For the oil trading desk I worked next to, every threat of Iranian oil embargo, every possible hijacking off the Somalian coast, every Nigerian riot, would send the trading guys off in a flurry of activities.
Back in 2007, oil was trending up into infinity and beyond, and everyone was in a great mood. I don’t know about now. But my point here is, these kinds of reporting are great and useful.
For a trader.
But you are not a trader, are you? 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 that holds investing instruments for the medium to long-term, then SHUT OFF the TV. They are worse than useless. They are downright detrimental to your investment portfolio.
The business reporting business, much like the regular media outlet, is like a stage. There is a cast of characters. They play their roles to the T, and they do not improvise. The networks themselves are self-serving media machines that get turned on for one reason and one reason only: to make a profit. Next time you see Maria Bartiromo, Erin Bennett or Becky Quick, you need to realize who’s paying their bills. It’s the advertisers, usually financial service companies that fill up these 10-20 second slots right after they tell you they’ll be “right back”. And who do they return with after the commercial breaks? Oh don’t you know it, it’s the in-house economist/strategist/analyst from those very firms.
Do you see what I see here? I see irreconcilable conflict of interest. I see many of those guests coming on the show with a very clear agenda in promoting a certain investment style, a sector which they are experts (and happen to do business) in. The intentions are not always malicious, but it does place a bit of a gag order on the interviews themselves. After all, should a disagreement arise, how far can an anchor go on challenging their guests’ positions, knowing fully well their counterpart is partially footing her salary.
And then there are those anchors that leave you scratching your head. These are the personalities that would be better off working in the pits of the Chicago Options Exchange. Because they seem to confuse their responsibility in covering useful business and economic analysis, with pulling hourly trading tricks out of the hat.
Lastly, there’s the experts themselves. Now given these are rational, intelligent analysts and economics that have swum against the tide and now at long last proven right. They come on the show with little to sell. What happens? Firstly, there’s very good research indicating that (much) more often that not, one year of correct outlook is usually not followed by another. So statistically speaking, the much celebrated genius you are watching on screen is probably going to be wrong in whatever it is that he is championing right now.
Secondly, there is the issue of ego. Imagine if you are an academic that has been writing papers on some obscure anomalies in the market or impending doom for years, floundering in relative obscurity. To be proven right all of a sudden, exalted to rock-star status, touted on cable news as the sage, paraded trough conferences like a peacock, what would that do to an average man’s ego? They may be genius, but they are still ego-centric just like everyone else, right?
It’s easy then to see how they could be affected by newly-found fame, attention, influx of respect and adoration. Not wanting to disappoint, or merely driven by stubbornness to continue being right, it’s no surprise that success in market predictions are rarely replicated, year after year.
So with all these: Conflicts of interest, confused role-playing, ignited by gigantic egos. Are you not better off by turning off the cable news? Pick up the FT or the WSJ, brush up on investment classics. There’s more than enough sense out there to keep your money safe.
The Investoralist is a blog that explores the fundamental principles of investing in today’s media-obsessed, amnesic, sound-bite driven world. Instead of focusing on technical aspects of securities analysis, we try to uncover the confluence of factors that have frustrated and confused many investors, and provide meaningful discussion based on a holistic look at the macro-investing environment.
The Investoralist came about when its founder got tired of the inaccurate, irrelevant, and often contradictory information that perpetrates the business media networks. As a passive investor herself, she felt under-served by one-sided and microscopic analysis that led many investors astray.
The Investoralist was a former analyst for a number of corporate outfits, was well acquainted with Excel and its modeling functions. She also has a business education that involved Black-Scholes and rudimentary Sarbanes-Oxley.