Fear & Loathing in the Financial Media

It seems there are two extreme factions within the financial advice-giving complex when it comes to media consumption — either everything matters or nothing matters.

In one corner, people pay attention to every single news item, economic data release, earnings announcement, market-moving development or geopolitical event. These people live and die by the latest headline. In the other corner you have the people who tell you to ignore everything. The louder the noise gets, the more you’re told to ignore it all. Both lines of thinking can turn out to be dangerous.

Paying attention to everything is nearly impossible, and even if you could keep up, trying to have an opinion on everything is a losing proposition. No one’s that good and it can lead to overconfidence and an illusion of control over the markets when you assume you’ve got it all figured out. On the other hand, ignoring eveything sounds great in theory, until you actually do check in to see what’s happening and over-react to volatility or the first charlatan prediction you hear. Actions matter much less on your decision-making ability than your reactions and both of these extremes could affect how you react to what comes out of the media machine.

The problem is that negativity, outrage and emotions work in the media’s favor. The old line goes that if it bleeds it leads (Phil Pearlman says the higher the VIX the higher the clicks). People complain all the time about how the media these days are all about click-bait, but what do you expect them to do, publish material that no will want to read? It’s a business, after all. You just have to be able to separate entertainment value from useful content.

There’s a study where a group of subjects are shown negative video footage (war, an airplane crash, an execution, a natural disaster, etc.). Researchers discovered that these viewers had heightened senses when compared to their viewing of positive story-lines. During the negative stories people pay more attention to details, recall more of what happened, become more aroused and engage more cognitive functions than they do during non-negative stories.

Most people don’t even realize their emotions are being used against them. It’s easy for to blame the media for their role in all of this, but they’re just giving people what they want and what works to gain eyeballs. I’m sure if people stopped watching or reading they’d change their strategy. Behavioral finance is still a relatively young field when you consider that salespeople and the media have understood our behavioral biases for some time now. They know how you’ll react almost better than you know yourself. People assume that this is all a creation of the 24/7 news cycle, but this is how it’s always been in the media going as far back as the 1800s.

I’m often asked to share my favorite sources of financial news, analysis and information. I could easily list off 10-15 different websites or people to follow on social media, but I always tell people to make things easy on themselves and simply read Tadas Viskanta at Abnormal Returns. Tadas is hands down the best curator out there there when it comes to news, analysis, podcasts, market research and the most relevant financial blog posts of the day.

If I had to choose one website to follow on a daily basis, Abnormal Returns would be it, no contest. You can use Abnormal Returns to either locate singular voices or websites you’d like to follow more closely or just keep up with everything Tadas posts that day for reading material. Whenever I’m busy or traveling the first place I check in to see what I’ve missed is Abnormal Returns.

Intelligent media consumption is important because the 24/7 news cycle isn’t going away. If anything, it will continue to become more and more nichey, as the media looks to expand their reach through different avenues. This can be good or bad for your decision-making ability or your sanity depending on how good your filter is for sifting through the multitudes of website and channels. Not everything matters, but some things do. Knowing who and what to pay attention to can help.

Source:
Trust Me I’m Lying: Confessions of a Media Manipulator

Further Reading:
My Idea for a TV Show About Investing

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What's been said:

Discussions found on the web
  1. John Clinton commented on Jun 09

    Great points, Ben. I follow many blogs and media outlets from a financial marketing perspective. (Probably too many.) Many of the big sites seem to be more focused on filling up the endless space they have with content. All in the name of getting clicks, not readers necessarily. I follow them via RSS but usually end up just reading the headlines. I thought it would help me take a pulse of the market, but many of the headlines are contradictory and I often feel I know less than more after following them.

    It helps to have better filters for your financial information streams, although even with filters you want to be careful not to select those that just confirm your biases. I favor financial writers and media who allow you to find information and make discoveries on your own, then form and express your own opinions.

    Thanks for sharing Abnormal Returns, though.

    • Ben commented on Jun 09

      I actually don’t think it’s a bad thing to follow a bunch of mainstream sites either. Sometimes it can help make you immune to acting on everything you read if you realize how much filler there really is. Agree that reading people you disagree with can be helpful, even though it’s painful at times.

  2. innerscorecard commented on Jun 09

    I think your point about NOT simply saying “oh I ignore everything” is actually a very subtle one. A lot of people say that’s what they do, but you can’t ignore literally everything unless you live in a cave. And if you’re on a “no-information diet” (rather than a “low-information diet”), you’ll get taken hard by the news you inevitably come into contact with in the course of life.

    • Ben commented on Jun 09

      Right, ignoring the noise and not paying attention are two completely different things. You just have to figure out what’s worthwhile and what’s worthless as far as sources of information go. Unfortunately, more people trust the first intelligent-sounding person they hear speak.

  3. SRum commented on Jun 10

    I’m waiting for Bloomberg News to announce that pros using the Bloomberg Terminal can’t even tie the market. The Street needs a serous injection of startup ideas. But I may be biased since I’m the BooleanGrid.com guy.