This is why you should ignore daily news on money

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July 23, 2008:

Financial Stocks Rise Wondrously on Woeful Results

“…triggered a rally in financial stocks. A Standard & Poor’s index of 29 companies — including lenders, Wall Street firms and money managers — has jumped 31 percent since July 15…

Some words used in this article: “triggered a rally, jumped, climbed, bounced back, progress, profitable, whopping number, could be that the worst is over”

July 25, 2008 (2 DAYS LATER):

Stocks Drop Sharply; Banks Lead Decline

“Widespread fear about the financial sector brought a dramatic end to the recent stock rally, as investors scrambled to take profits from bank shares and sent the Dow Jones industrials down more than 280 points, its worst loss in a month.”

Some words used in this article: “plunged, worried, struggled, cascading effects, paralysis, sell-off, brought down, strong run, lost, painful, sour note, weak job market, scarcity, discouraging, harder, beleaguered, woes, decline, dampening”

* * *

Related articles on stupid media articles:
1. The media is atrociously bad at prediction and I’m sick of it

2. The worst financial advice from around the web! (Today only)

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15 Comments

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  1. Ugh, the media disgusts me, especially when it comes to covering the economy and the markets. Sadly, people will continue to listen to their news and make stupid financial decisions because of it. Oh well, their loss I guess.

  2. The media are performing a public service by scaring people out of the market and out of saving money in general so they’ll stay on the treadmill of making money and spending it all until they drop dead – therefore funding my retirement and ensuring that I don’t meet them out in the wilderness. It’s a win-win.

  3. you’re right – the book Fooled by Randomness by Taleb tells us more about this fact and why newspapers and news in general should be ignored if possible, there is just too much noise in it
    he also states that it might be better to ignore the daily performance of your portfolio, it will just make you feel bad – checking it once a month is more than enough, as any (good) portfolio will probably underperform quite often, even though your brain knows that, you cannot cheat and ignore your feelings, very interesting book…

  4. The media is bi-polar. One day an article will tell you to buy and the same day telling you it’s the end of the world. Of course you can’t listen to the media! I still am staying out of the market. i don’t like all the volatility. But then again I’m not a master stock trader.

  5. LoL! That made me giggle! =)

    That’s why I don’t have a TV and I just read books. (But every once in a while I do skim through articles online and the wall street journal.)

  6. The news media is always late to the party, specially with reference to financial or economy related areas. TV, web or print – one should realize that news is reported after the event or fact, if there is a news article before an event then either it is for spin purposes or mere speculation. Anyone interested in trading stock should therefore be very wary of trading based on news media, the solution is to trade based on educated judgment based on company and economic fundamentals or just plain vanilla index funds.

  7. This reminds me of one of my pet peeves, the phrase “the economy” as used in general parlance. People say “the economy” is bad when they and two or three friends have lost jobs, and that it is good when they are doing well. It seems to be an excuse for remaining powerless.

    A friend of mine owns a business that was booming in 1991 and slow during the dot-com era. Why? Because during the dot-com era, his primary customers (younger, bohemian types) were not able to find affordable housing in San Francisco. He still insists that “the economy” was “good” in the early 1990s.

    Of course, this pardons him for not tracking his market and customers and changing his merchandising, branding, and offerings in response to reality!

  8. [...] If you don’t want to lose money, then do NOT read the news [...]

  9. Good observation, this is the kind of stuff that keeps me comming back.
    every morning as I wake up turn the switch and read the news your website will be one of the first that I visit.

    go ramit =)

  10. This just solidifies the thought that a person usually should just buy and hold, and in that buy and hold index funds! Good point there Ramit.

  11. While I understand where you are coming from, the fact is, the media is a great predictor of short term gains and losses in the market (approximately 1-6 weeks with a correlation of about 85% to the DAX). But one mustn’t base their predictions on hyped stories in mainstream media, but rather on the quotes analysts use in media like the financial times and Wall Street Journal. Once a stock or commodity reaches a particular awareness threshold for that market with a net of positive or negative statements, the stock will move in the corresponding direction.

    -Mark Inman
    Media analyst for Media Tenor International

    *Media Tenor International is a U.N. recognized media watchdog specializing in quantitative media analysis.

  12. There’s a huge amount of volatility in the stock market right now. I mean, this really is unusual. One day, huge run up, next day huge drop, day after that, back huge run up again. And the ones leading all this are companies that have some of the weakest fundamentals (along with some legitimate good news from good companies).

    The news… usually only reports what’s going on right now, which is chaos in my opinion. And by the time they report it, they’re typically already a day late. I think that’s forgivable if they’re just doing their job and reporting the news. Not so forgivable is when some feel the need to put on their amateur economist hat.

    However, I believe you may be referring to reader’s reaction to news, which I fully agree that if you are easily worried by news of high volatility, it would be best not to look at the news right now.

  13. I agree the average investor need not worry about daily news. The market is volatile now, but it has been volatile in the past. One major difference is that 10-15 years ago market news was not as timely or readily available to the average person. For those who do not know much about financial markets, the breaking news, real-time quotes, etc. can make things seem terribly scary!

  14. [...] I Will Teach You To Be Rich had a very short but very funny (and informative) post last month about not listening to the news regarding investing. Jump to the post. [...]