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  • Wise Words on Troubled Times

    Posted by Dan from Madison on September 28th, 2008 (All posts by )

    Like many, the current events in the financial markets have me a bit dazzled.  I understand a lot more than I did a few weeks ago from reading blog posts, newspaper articles and a small book or two.  I also have been watching CNBC and Fox Business which have had a lot of interesting information on them as well.  But I have a reservation.  Whenever I see a report on CNBC or soak in a few pixels of information on a website I get a certain empty feeling.  I feel as though I am being played.  These information outlets feed on advertising for their lives, after all.  Blood always leads, even on the financial pages.

    The very best thing I have read on the current situation was in the WSJ weekend edition a week ago.  It wasn’t “world ending” stuff, and it was easy to understand and concise.  Several articles in the same edition were excellent.

    That said, here is an excellent quote from Blogging Stocks:

    In these tough times, the media does it best to convey the impression that it’s really looking out for the best interest of the humble investor.
     
    In its September 28, 1998 issue, Fortune’s cover screamed: “The Crash of ’98. Can the U.S. Economy Hold up?” The Managing Editor explained that Fortune was “dedicated” to making sense of the “scary” financial situation.
     
    How helpful!
     
    I am not trivializing the current financial crisis. I have no idea what the direction of the markets will take in the future. What I do know is the financial media have a vested interest in hyping extreme conditions because it is in their economic interest to do so.
     
    Investors can learn from the terrible track record of the media in predicting the future of the markets. They are not a reliable source of information.
     
    What are your alternatives?
     
    Consider the 80-year history of the markets, which have experienced ten bear markets. Look at long-term risk and reward data. Read books that have peer review, academically tested data supporting intelligent investing principles. There has been a trend by authors of these books to write them in way that is easily understood by everyone…
     
    …Ignore the financial media, unless you find it entertaining.
     
    The big wooden horse the Greeks gave the Trojans was not a gift. Neither is the information provided with such confidence by most of the financial media.

    The article is appropriately named Kissing Cousins:  The Wall Street Collapse and Media Hype.

     

    12 Responses to “Wise Words on Troubled Times”

    1. david foster Says:

      Whenever a trend/bubble begins to take off, the vast majority of media people get behind it, pouring gasoline on the flames. This creates a positive feedback loop, also known as a vicious circle, and certainly contributes to makeing bubbles more extreme.

      I remember *very* few articles questioning the proposition that house prices would go up steeply forever, until maybe a year and half ago….even in the more responsible business media.

    2. Mrs. Davis Says:

      The purpose of the media is not to distribute the truth or to educate the public. It is to earn a profit.

      Remember also that the MSM is now the one industry that is in even deeper trouble than finance. They are rapidly losing market share in the business of renting our eyeballs for advertisers. So they will say whatever is necessary to keep our attention.

    3. david foster Says:

      “the purpose of the media is to earn a profit”…only in theory. To a substantial extent, the media operates to further the social, professional, and career interests of its own executives and employees. If NYT was primarly concerned about shareholder returns, might they not turn down the political bias just a notch or two?

      Many people who go into the media are very fashion-conscious (in the sense of trends, not necessarily of clothing) and always want to be dealing with whatever is hot or cool at the moment. If Internet is cool, they don’t want to be writing about the (1998) opportunities in the housing industry or the mining biz. If housing in the talk of the town (2006), then *that* is what they want to focus on.

    4. aaron Says:

      It’s not just to make a profit, it is to profit. Continuously. Why go for a big piece of a small pie that doesn’t grow vs. a good piece of a big, ever growing pie.

    5. Tim Fowler Says:

      I’m not sure what he means by “the 80-year history of the markets”, markets, even in the narrow sense of markets in exchange traded stocks or bonds, go back longer than that. The Dow Jones Industrial Average goes back to 1896, and that’s just the first reporting of a particular index, not the beginning of stock markets in the US, much less in the world. They where trading stocks on Wall Street in 1792. The Amsterdam Stock Exchange (now merged in to Euronext) goes back to 1602.

    6. Mrs. Davis Says:

      To a substantial extent, the media operates to further the social, professional, and career interests of its own executives and employees.

      For a while. But not for long. They need to make a profit to stay in business.

    7. Brent Says:

      It was interesting at my job today with the stock market collapse. There is Merrill Lynch floor in the building where I work (the sign has already been removed) and I’ve never seen bankers look so flustered at the end of the day.

    8. Jose Angel de Monterrey Says:

      I guess the media will always try to increase the impact of the news, if they had their way, wall street and the whole world economy would disappear just to make a great headline the following day in the morning and sell tons of newspapers.

      Now it is Wall Street, but a couple of weeks ago was Sarah Paulin, and then I don’t remember what it was that strongly grabbed my attention and made sit for hours in front of the tv watching endless updates and debates about it.

      Okay, the markets are suffering a correction because it just so happen that we are in a recession and the last people to find out about it was the folks at Wall Street. The party is over and It just dawn on all those investors.

      Freddy and Fanny seized by the Fed. Securitizing loans turned out to be a bad business in this times.

      Lehman, Merryl and other investment banks are gone because their business model was not up to this globalized times. They were swallowed by vast and global banks with huge resources and bottomless wallets. These investment firms had reached the end of their road and had no where else to go but to become regulated banks. That we know now.

      AIG should have never gotten into insuring mortgage loans. We’ve just learned that now too, it took a few hundred billion dollars.

      But in my opinion, the US has a market that learns from bad times, they will pick up the pieces and go back to business, but it won’t be as usual, there will the before and after, and there will be some rules to follow and some adjustments.

      But I wonder about other markets in the world, other countries that choose to close their markets before seeing them collapse. Other countries that silently and obscurely finance their banks with their citizens money, saving the shareholders, management and investors.
      I believe those markets do not learn at all.

    9. Dan from Madison Says:

      Interesting comment Jose, thank you for leaving it.

    10. Danny L. McDaniel Says:

      Virtually all the talking heads on the financial cable channels have neither an understanding of markets and economics other than a swallow situational sense nor do they understand the differences between markets and economics. The best you can describe -what passes for indepth coverage of Wall Street- is infotainment. The only exception is Jim Crammer.

      Danny L. McDaniel
      Lafayette, Indiana

    11. gloria excelsis Says:

      This comment was posted at Roger L. Simon’s blog a couple of days ago.

      “I worked at a bunch of the Big Media sheds over the years, including Time and BusinessWeek. Believe me, the bias — and the favors — are palpable.

      “At Time, favored sorts were allowed to vet, polish and rewrite their quotes. I know this because, having once called Kissinger for comment, the bureau chief went ballistic when I filed.

      “I’ll have to call Henry back and apologise,” she seethed. evidently she did just that because the quotes, when they appeared, were sharper, more insightful and generally reflected better on the speaker than those I initially took down.

      “Being on a first-name basis with celebs, political or otherwise, is very important to these people. It makes them feel important, gives them an impressive name or two to drop at dinner parties, and it also cements the celebs’ monopoly on being the standard sources of the go-to quote.

      “Ever wondered why Jesse Jackson, a man of no discernible achievements, reigned for decades as the primary black spokesman? The above attitude should explain it.

      “At BusinessWeek, which was in the early stages of the decline that continues to accelerate, things were simply bizarre.

      “Here was a magazine purportedly for the investor class, but staffed by upper-middle-class lefties. At the weekly meetings, where we would sit about and toss up story ideas, the actual business never began until the obligatory half-hour of Bush bashing had concluded.

      “I heard every left fable you can imagine at those sessions — the coke-snorting, fascist chimpoid etc. If you bothered to mention that Bush has a better degree than Gore, the howls could be heard all the way up to Terry McGraw’s penthouse office. When Dan Rather’s draft-dodging smear exploded, it was accepted as an article of faith. Long after the superscript clue proved those documents to be forgeries, BW editors were still insisting that, you know, superscript typewriters were available back then. The sources were generally Kos etc.

      “No wonder I’m hearing from those still at BW that the mag is likely on the block next year. Given that it hasn’t put together two profitable quarters in a row for six years, it’ll be that or curtains.

      “This election is the MSM’s last roll of the dice. If they can’t push Chicago Slim over the top, they know that demographics, technology and reader disenchantment spell their doom.

      “Just you watch: If Big Ears makes it to 1600 Pennsylvania Ave., the push will be on to give the US an “unbiased” national media/broadcaster, a la the BBC. Lots of jobs for the worshippers in that little gig.

      “Oh, and expect the return of the fairness doctrine, but on steroids. Blogs like this one can expect DOJ attention.

      “Maybe it’s my imagination that is on steroids. Sure hope it is — but after watching the Obamabots swarm over anything remotely critical, I shudder to think what they will do when the cudgels of government are firmly in their righteous little fists.

    12. Danny L. McDaniel Says:

      As the late Flannery O’ Connor once said,”Faith is knowing what the truth is, whether you believe or not.”

      Danny L. McDaniel
      Lafayette, Indiana