Good morning & happy Monday!
“Economists are about as useful as astrologers in predicting the future (and, like astrologers, they never let failure on one occasion diminish certitude on the next.)”
– Author Schlesinger, historian 1917-2007
Well, the day has arrived. I’ve been alluding that I would talk about the media in an upcoming memo, and today is the day!
Just in case I’ve not made my position clear before: I HATE the media! The financial media I find particularly disgusting. They harm people and if you aren’t careful, they can harm you.
Let’s backtrack for a second before my blood pressure rises too high. 😉
How does the media make money? Advertising revenue. The more people watch, click, or scroll the more ad revenue they generate. Media companies are a business just like any other business, they exist to make money. So, when they report on a story is it because it is true and worth reporting on or because it generates more views?
Let’s just take a hypothetical example. Let’s say there are 3 headlines next to each other on a financial news website:
- “A long-term view: why patience pays off for investors”
- “A market crash is immanent says veteran 35-year portfolio manager”
- “This trade has generated over a 100% return this year and experts believe the best is still to come”
Which of those 3 headlines do you think will get the least number of clicks? With a fairly high degree of certainty, I would say the first headline would be in last place by a long shot.
Despite the fact that article number one is most truthful, the other two articles would most certainly generate more clicks, thus more advertising revenue. You can hear the media companies say, “Cha-ching” every time a salacious article is released.
So, financial publications, websites, podcasts, and TV shows don’t run stories that encourage good behavior or help investors, they run stories that generate them the most amount of revenue.
If CNBC, Fox Business, or Bloomberg started today’s show with a statement like, “It’s Monday morning and as the stock market opens today don’t take too much stock in what happens today or any single day. What matters is building wealth in a properly diversified investment portfolio that serves your financial objectives and then being patient enough to allow it to do its job. Today, this week, and even this year, will have very little effect on your lifetime portfolio results, so relax and stay focused on your goals.”
What would people do with a message like that? They would turn off the TV and think to themselves, “I don’t really need to watch this show because they are reporting on news that really makes very little difference to me.” All their ad revenue would plummet, and they would go out of business.
So instead, they might say something like, “Today’s a critical day in the market. We’re expecting the jobs report followed by the inflation report. This will be critical to what the Fed does in their meeting next week and could really have a huge impact on the market. We anticipate a lot of market activity over the next few hours so stay tuned right here, we will keep you informed as things develop. Your money never sleeps so we will make sure to report on the news you need to keep your portfolio growing.”
That may sound helpful, but in reality, it is the complete opposite. They are leading their audience to believe that every moment of every market day is critical. Miss a moment and you miss a lot. See how deceitful this is?!
Turn that crap off!
Understand that they are manipulating your emotions to get you to tune in longer, scroll further down the news feed, or click on more salacious headlines. Don’t fall for it. See it for what it is … “click bait.”
I made a conscious decision about 4 years ago to turn off the news media in my home. I found myself digesting an unhealthy amount of news and it was putting me in a bad place mentally. I think I’ve watched less than 10 hours of news in any year since 2020. I most certainly stay informed with important news, but watching it for hours a night helped no one, it only hurt me.
My friends, please reduce your consumption of financial media. If stocks go down 5% today, who cares? If it goes up by 5%, likewise, who cares? A good day or a bad day in the market is insignificant in our long-term goals. We as investors understand that there will be short-term choppiness in our investment portfolio, and we don’t get worked up about it either way. We don’t get super excited when we have a gangbuster few days and we don’t get super bummed when we have a really cruddy stretch. We understand it’s just all part of the game.
Here’s a dirty little secret the media will never tell you: NOONE KNOWS WHAT THE FUTURE HOLDS. There are a whole bunch of people who make a whole bunch of money trying to tell you what the future holds (think about how much money is spent on these presidential polls), but the reality is that no one knows.
I am oftentimes faced with decisions when I don’t know what I should do. As a business owner, as a financial planner, as a husband, as a father, as an employer, there are all sorts of times I have to make a decision that will affect the future, and I don’t know what to do. So, I always try to simplify my decision-making process by asking myself, “what do I know?”
That is how I face investing. What will the S&P 500 be at one year from now? I have no earthly idea.
Will Nvidia stock have a great year in 2025 like it did in 2024? Your guess is as good as mine.
Will the United States fall into a mild recession in the year ahead? Maybe. Maybe not. Who knows?
Who will win the presidential election in a few months? Right now, it’s a 50/50 race, could go either way.
So, rather than allowing what we don’t know to paralyze us, let’s take a look at what we do know.
We know that equity (stock) investing is very profitable over the long run.
We know that after taxes and inflation equity investing results have been about 3 times more profitable than their bond counterparts.
We know that history teaches us that despite down days, weeks, months and even years, stocks are an unparallel wealth-building tool.
We can take these “knowns” into the world of the un-known with confidence to make wise decisions.
The media will never tell you this. I will. 😊
Over the last few years, I’ve been taking screenshots of ridiculous (and wrong) financial headlines just to demonstrate how ludicrous the financial media is. I will plan on sharing those with you next week. In hindsight these headlines are quite amusing, but at the time I’m fairly confident there were people who were harmed by following the advice they espoused.
Stay the course my friends. This is journey of investing, although not easy, is exceptionally rewarding for those with the patience to see the results.
We will make our final decisions based on facts over feelings and history over headlines!
Thank you for allowing me to be a part of your team!
Make it a great week ahead.