By Bob Wood, MMNS
When you are investing, reliable information is an obvious benefit. Those who remember what passed for â€œsolidâ€ information during the closing weeks of the secular bull market in 2000 know full well that helpful information was scarce then — at best. On this score, the more things change, the more they remain the same.
Todayâ€™s biggest offender in disseminating bad information is the financial media, with the worst coming as free advice on television. In particular, I can no longer force myself to watch the garbage that fills time on the Fox Business Block. That stuff is so bad it gives me headaches!
Nearly as bad is the financial reporting on CNBC. Of course, bad information is usually hard to separate from good information until time passes and we can judge accordingly. Perhaps one good indicator of what is or is not a source of reliable information can be found in last weekâ€™s commentary from John Hussman of the Hussman Funds. In his December 3 comments, he described his recent appearance on a financial network. The following part of his message was widely posted around the web.
â€œI appeared briefly on CNBC last week to discuss recession risk, but beforehand, I was asked to put a positive tone on my comments, to which I responded â€“ â€˜Look, my interest is in making sure that investors have positions that they are able to hold through the complete market cycle, including a potential 30% bear market loss off the highs, without having their financial security endangered.
â€˜If theyâ€™re carrying more risk than they could endure through the course of a bear market, they should cut back now. Iâ€™m not going to wave my arms around about doom and gloom, but I think itâ€™s a crucial time for investors to think about the risk theyâ€™re taking, and if you donâ€™t want me to say that, please donâ€™t have me on.â€™ Well, I went on, and though we ran short of time, thatâ€™s still my message.â€
Huffman was asked to â€œput a positive spinâ€ on what he would say! Am I the only one not surprised to see that CNBC prefers offering air time to promoters who will say only positive things about the economy and the stock market? Is the networkâ€™s purpose to inform — or to sell stocks to the public?
Does this occurrence bring back memories about all the good people who lost money in stocks when the bubble burst in early 2000? Then, we were hearing that the only risk involved with technology stocks â€œwas not owning any.â€ In the next couple years, the NASDAQ suffered an 80% loss. So there were, after all, bigger risks in buying shares of companies with no earnings — and none foreseen!
Does the print media offer better information? What about Money Magazine, Forbes or Fortune? I canâ€™t speak for them since I donâ€™t read them, but I still find myself inundated with information, and most of it is usable and valuable, too. One caveat I use about where I go for information is that it reflects my own personal bias. Be sure to note this before you go looking where I do!
Possibly the best place to start looking is in your local newspaper. Sometimes the most valuable information is what is happening right in front of you. Knowing what is going on in your local economy could be a great indicator of what is happening in the larger economy. When your local government is struggling with budget deficits and cutting jobs, these situations may well be happening in other areas of the economy, too.
Another place to look for good information is The Financial Times newspaper. For those who prefer to invest in countries and economies that are better managed than our own, the paper offers plenty of news about places and companies seldom mentioned in the domestic media.
The internet is probably the best source of information for investors, whether they manage their own accounts or simply want some contrast to what their brokers or advisors offer. Large national newspapers such as The New York Times and The Washington Post are available free online, and you can often read news items and editorials online before seeing them in your local paper, since the larger papers often feed the smaller ones. Also, for those seeking additional information on the global scene, check out the Asia Times online.
So much of what goes on geopolitically in the U.S. is spun for domestic consumption. Way too much information dispersed by major news media is sourced from the government or Pentagon — without fact checking. This gives those news items a bias that serves no other purpose than to spread propaganda, which is quite useless for investors.
While newspapers offer a broad array of worthwhile items, online sources offer a wider field in terms of what makes markets, from geopolitics to world economic news. Check out www.antiwar.com for more relevant takes and less bias than you hear on the evening news. Also, www.rawstory.com offers an interesting array of items typically not covered without bias, if at all, by more traditional news outlets.
Does it seem odd that I would recommend newspapers and online news sources as investing tools? Besides studying history, news sources, unbiased whenever possible (and, yes, that obviously rules out Fox News) are investorsâ€™ best tools.
For those wanting investment-specific information, check out www.prudentbear.com, especially the weekly piece by Doug Noland. His articles tend to be long and esoteric in places, but he does counter all the happy talk and positive spin so commonly found on CNBC. This web site also compiles articles from various contributors, offering a broad range of ideas. If youâ€™d like and if you know what youâ€™re talking about, you, too, could submit an article to post there!
Another good online source for investors is www.321gold.com. This site also compiles from varying sources news, submissions and articles that interest investors in precious metals. If you want a better idea of the real rate of inflation, as opposed to the bogus numbers offered by our government, youâ€™ll find it there.
All investors should check out Hussmanâ€™s site and read his weekly commentary. John Hussman, Ph.D., the mutual fund manager who refused to put a â€œnice spinâ€ on his views for CNBC, gives investors an academic look at the economy and markets. Before you rush into buying stocks based on the highly touted Fed Model, which often concerns itself with whether the Fed will cut rates by a little or a lot, check Hussmanâ€™s research to see what effects such moves have made in the past. His views often oppose the hopeful effects you hear from promoters in the financial media.
Of course there are other fine sources of information, but these will get you started and give you alternative sides to the media stories. Over time, you will come to appreciate just how biased and promotional the financial media can be and how little value their information provides.
Have a great week.
Bob Wood ChFC, CLU Yusuf Kadiwala. Registered Investment Advisors, KMA, Inc., email@example.com.