How Financial News Confounds and Confuses
I check the financial news everyday. Of course, I'm a professional and am expected to know "what's going on" in the fabulous world of money and investing. And that's basically why I check in each day. It's not to gain any great insights or some sort of edge in my investing.
If you're not a professional, you may want to consider minimizing - or even eliminating - financial news in your daily routine. If you have an insatiable curiosity about the goings-on of bankers, government officials, investment markets and such (and why would you?), I suppose you could satisfy your curiosity without much harm - as long as you don't take any of this stuff too seriously.
You see, financial news may be one of the worst sources of information or inspiration for making investment decisions - most especially if you don't have some sort of real strategy that guides your decisions, rather than the day-to-day happenings you read or hear in the financial news. In fact, if you do make any financial decisions based upon what you read and hear in the financial press, well...good luck.
Here are two examples of just why financial "journalism" will screw up your thinking and cause you to run in circles, rather than protect or build your wealth.
#1: CNBC Interview with Head of ECRI.
Here we have the co-founder and Chief Operations Officer of this respected firm interviewed by some CNBC "talking heads." Lakshman Acuthan (that's the name of the head of ECRI) carefully outlines his reasons for asserting that the U.S. is heading into recession. We're not quite there, but all the data his firm compiles points in that direction. His interlocutors question him, reminding him of all the "positive signals" the economy has been throwing off. Acuthan carefully and cordially responds, making his points in a calm, clear manner. The interlocutors become frustrated as Acuthan responds to their objections. They are, of course, no match for Acuthan's knowledge and understanding of the data, but they persist. Finally, the woman who is the head interlocutor, in an exasperated tone of voice, demands to know, even though the data shows that we're heading into recession, why do "we" feel so good.
That's basically the crux of her argument. She - and presumably others she knows, since she says "we" - feel good. And if we feel good, how can we be heading into a recession?
What have we learned from this encounter with the financial media? If you listened to Acuthan carefully and followed up by going to his website to verify his and his firm's credentials, perhaps you learned that his firm believes we're heading into recession. Of course, he may be wrong. And unless you run a firm that could benefit from what ECRI provides - data that discerns the state of the economy in terms of the business cycle - why would you want to follow what ECRI has to say in the first place?
As for the "journalists" on CNBC, I hope you see their utter lack of knowledge, understanding and, worse, their obsession with always showing why things are just fine. If not, you're sunk.
#2: Front Page of Reuters Markets Section
On the front page alone, we see the following references regarding the U.S. dollar:
- "Growth Worries Send the Dollar Lower"
- "...dollar hits a two-month low..."
- "...as the dollar picks up paring earlier losses..."
(This was from the May 1st edition of the Reuters website.)
All I did was scan down the page and re-print what was there. So what did you learn? That the dollar was up and the dollar was down? And how did that inform your investment decisions? How did that help you either protect or grow your wealth?
Indeed, how did that inform you in any way that could possibly make your life better, in any way, shape or form?
Can you see, from these two examples, how the financial media and financial "journalists" provide neither information nor interpretation of data and events that could possibly shed any light on what's going on in the economy? (Please excuse the "quotations" when I refer to financial "journalists" but I really think the use of the term "journalist" is, for the most part, misleading - to say the least.)
Well, do what you want. But I really think you'd be better off spending your time reading a great book, where you might learn something about the world, life and the human spirit rather than listening to or reading financial news. And with that understanding, and a little technical knowledge (which you won't get from the financial media) plus maybe the help of a good advisor if you think you need that, you'll make better decisions about your money.
If you're not a professional, you may want to consider minimizing - or even eliminating - financial news in your daily routine. If you have an insatiable curiosity about the goings-on of bankers, government officials, investment markets and such (and why would you?), I suppose you could satisfy your curiosity without much harm - as long as you don't take any of this stuff too seriously.
You see, financial news may be one of the worst sources of information or inspiration for making investment decisions - most especially if you don't have some sort of real strategy that guides your decisions, rather than the day-to-day happenings you read or hear in the financial news. In fact, if you do make any financial decisions based upon what you read and hear in the financial press, well...good luck.
Here are two examples of just why financial "journalism" will screw up your thinking and cause you to run in circles, rather than protect or build your wealth.
#1: CNBC Interview with Head of ECRI.
Here we have the co-founder and Chief Operations Officer of this respected firm interviewed by some CNBC "talking heads." Lakshman Acuthan (that's the name of the head of ECRI) carefully outlines his reasons for asserting that the U.S. is heading into recession. We're not quite there, but all the data his firm compiles points in that direction. His interlocutors question him, reminding him of all the "positive signals" the economy has been throwing off. Acuthan carefully and cordially responds, making his points in a calm, clear manner. The interlocutors become frustrated as Acuthan responds to their objections. They are, of course, no match for Acuthan's knowledge and understanding of the data, but they persist. Finally, the woman who is the head interlocutor, in an exasperated tone of voice, demands to know, even though the data shows that we're heading into recession, why do "we" feel so good.
That's basically the crux of her argument. She - and presumably others she knows, since she says "we" - feel good. And if we feel good, how can we be heading into a recession?
What have we learned from this encounter with the financial media? If you listened to Acuthan carefully and followed up by going to his website to verify his and his firm's credentials, perhaps you learned that his firm believes we're heading into recession. Of course, he may be wrong. And unless you run a firm that could benefit from what ECRI provides - data that discerns the state of the economy in terms of the business cycle - why would you want to follow what ECRI has to say in the first place?
As for the "journalists" on CNBC, I hope you see their utter lack of knowledge, understanding and, worse, their obsession with always showing why things are just fine. If not, you're sunk.
#2: Front Page of Reuters Markets Section
On the front page alone, we see the following references regarding the U.S. dollar:
- "Growth Worries Send the Dollar Lower"
- "...dollar hits a two-month low..."
- "...as the dollar picks up paring earlier losses..."
(This was from the May 1st edition of the Reuters website.)
All I did was scan down the page and re-print what was there. So what did you learn? That the dollar was up and the dollar was down? And how did that inform your investment decisions? How did that help you either protect or grow your wealth?
Indeed, how did that inform you in any way that could possibly make your life better, in any way, shape or form?
Can you see, from these two examples, how the financial media and financial "journalists" provide neither information nor interpretation of data and events that could possibly shed any light on what's going on in the economy? (Please excuse the "quotations" when I refer to financial "journalists" but I really think the use of the term "journalist" is, for the most part, misleading - to say the least.)
Well, do what you want. But I really think you'd be better off spending your time reading a great book, where you might learn something about the world, life and the human spirit rather than listening to or reading financial news. And with that understanding, and a little technical knowledge (which you won't get from the financial media) plus maybe the help of a good advisor if you think you need that, you'll make better decisions about your money.
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