Be a Smart Investment News Consumer

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investment newsReading, watching, and listening to investment news well, or any news well, is not nearly as easy as the vast majority of people perceive it to be. The news is a mine field, the mines are disinformation and misinformation, and there are a lot of mines in the field. The mines are due to various personal motivations, biases, and errors. Below are some guidelines for being a smart consumer of investment news.

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Avoid or Be Skeptical Regarding Quickly Provided Reporting and Analysis

You do not want quickly provided reporting or analysis. You want good, timely reporting and analysis. Very often, when people write or speak soon after an event, they are short on facts, or incorrect regarding the facts, or have not constructed their best thinking yet. Also, with quickly provided analysis, there tends to be more speculation. Generally, do not spend your time on speculation when, in a short time, no speculation may be necessary.

The faster something can be reported on well, the better; but, almost always, there is no financial benefit to you in knowing immediately or nearly so. It is more efficient to consume the news on a periodic (e.g., daily) basis than a minute-by-minute basis. Minute-by-minute reporting tends to be repetitive and fragmented.

Lean Toward More-Direct Sources

The further down the chain you go, the greater the chance that bias or error has been introduced. When it is practical to do so, do not read someone’s article based on a Reuters or Associated Press (AP) article. Read the article as provided by Reuters or the AP. Lean toward articles written by people who were immersed in the situation―that is, people who saw, heard, felt, tasted, or smelled it themselves or, secondarily, interviewed people who did―and have better related experience. Interviews where you can see the other person are better than verbal-only interviews. In-person interviews are even better. If two people are equally unbiased and competent and one is from India, the one from India will probably report better on corruption in India because, among other things, they understand the culture better.

Lean Toward Reading vs. Watching or Listening

The problem with television, radio, video clips, et cetera is that you have less control over the use of your time. With reading, particularly on the Internet, you can readily consume as much of an article as you desire. You can readily read a sentence, a paragraph, a couple of paragraphs, a few paragraphs, a section, or the entire article. You can readily skip ahead in the article if you desire. If you want to stop reading and think for a while or spend more time looking at a graph or chart, you naturally do so. You do not need to pause anything, if pausing is even possible.

Use Mainstream Sources as Core Sources and Supplement with Alternative Sources

Your core sources should be places like Reuters, the AP, and Bloomberg. These places employ more professional journalists and editors. Generally, professional journalists research and write better; and professional editors guide and edit researchers and writers better. Also, these places very largely attempt to adhere to journalistic ethics.

Alternative sources such as Seeking Alpha are not good core sources. Generally, the quality of the research, writing, and editing is not nearly as good. Also, there is a far greater tendency for things to be written or published in an attempt to sway, versus inform, investors. On the other hand, the articles provided by alternative sources are, sometimes, superior to the articles provided by mainstream sources. This occurs because the article covers something the mainstream media did not, or the analysis is better, and the author displays enough knowledge, intelligence, skill, diligence, and integrity.

You can lose a lot of time sifting through alternative source articles looking for good ones. Try to remember authors who produced good articles. If possible, sign up to be notified when they produce other articles. Some sources, like Abnormal Returns and LearnBonds, provide daily and/or weekly potential reading lists that include alternative source articles. Using sources like this can save you time because the alternative source articles have been screened. Use sources like this that have a track record of listing good articles.

LearnBonds focuses on fixed-income investing. Fixed-income investing is under covered. Using LearnBonds can better balance your investing knowledge.

Avoid or Be Skeptical Regarding Politically Biased Sources

Good information is neither right-wing nor left-wing (and neither Republican nor Democratic). It is independent of politics.
A few years ago, I did an independent analysis of Fox News. About 50% of the stories were doctored to support a right-wing agenda. For example, a key fact was withheld or the moderator said some things prior to the story to influence you to interpret it in a certain way. In addition, the 3-person panel discussions were designed to make the right-wing view seem moderate and wise via a lousy left-wing argument, a radical right-wing argument, and, then, a relatively strong right-wing argument. From what I have seen of Fox Business, it suffers from a similar disease. (Fortunately, Fox Soccer does not, as I am an international soccer fan.)

The like problem from the left is more about individuals than it is about entities. Paul Krugman is not an economist. He is a left-wing economist. Much of what he writes and says is geared toward promoting a left-wing agenda. Generally, avoid sources with a political bias. When you do not, there is strong chance you will be disinformed somehow; and you may not know you are being disinformed. Do not spend your time on questionable sources warranting extra fact checking when you can simply use a better source.

Any information from an active politician should be processed with a lot of extra skepticism. Almost all active politicians only communicate totally non-deceptively when they think it is tactically best. Most of the time, they are disinforming you somehow, even if it is simply via their exact word choices or what they do not write or say. The American press almost constantly interviews active politicians as if this is not so. Members of the press do this to keep their job. If they cannot get the interviews, they no longer have the job. Many nonpolitical interviews are of poor quality for this same reason.

Be Aware of the Influence of Money

What is written or said is often a reflection of financial motivation. This is particularly true in the realm of investments. To the extent practical, be aware of a person or entity’s financial motivations. What they are saying may reflect these motivations. For instance, people who work at a fund provider tend to promote investing in the fund(s) of the provider; and people who own or work at a dividend stock or gold website tend to promote dividend stock or gold investing. Two groups to be particularly wary of are stock short sellers and microcap stock pumpers. False or misleading information may be provided, important information may be withheld, et cetera in an attempt to influence you to buy or sell what they want you to buy or sell.

Some people are much better about this than others. Warren Buffett is a good example. Much of what Mr. Buffett says is genuinely meant to help people. Even Mr. Buffett bends some to the realities of business though. I have never seen or heard Mr. Buffett be dishonest, but I have noticed him not discuss something because it would be too detrimental to his investors or business partners to do so. This is similar to the approach I take. I aim to always be completely honest; but, occasionally, I do not discuss something because it would cost too much to do so.

Be aware that some people are paid to message and comment for or against certain investments. You often cannot tell if someone is paid or legitimate. That said, if someone is online around the clock for days, they are very probably actually more than one person and paid. Also, people who claim to have no financial interest sometimes have a financial interest. Some people and entities can safely or relatively safely claim they do not have a financial interest when they do.

If a source has a known related financial motivation, read, watch, and/or listen closely to determine if the motivation is leading to disinformation. Sometimes, you can recognize this quickly; and sometimes it takes some time. If there is a significant amount of disinformation, downgrade your belief of the source and/or use other sources. Sometimes, you will be unaware of a source’s financial motivation to begin with; but what they say will tip it to you. People make various types of errors. On some subjects, there are legitimate different perspectives. Once someone is incorrect in a certain direction absurdly or repeatedly enough, you know you are dealing with something other than errors or perspectives.

Be Aware of Media Hype

Media hype occurs because of the potential for more money and fame via a wider audience. The Cyprus banking crisis was much hyped. Cyprus’ economy is tiny. Cyprus’ situation was unusual because the Cypriot banks in crisis had a very large amount of foreign (e.g., Russian and British) deposits and a lot of these deposits were believed to be shady. Cyprus was not a precedent-setting sort of situation. Although people usually used the word “tax”, it was a levy-for-equity exchange (i.e., a bail-in). The European Union (EU) did not want to levy accounts of 100,000 Euros or less. Cyprus did in order to maintain more of its foreign banking industry. If a run on a bank(s) elsewhere in the EU had begun, the EU had ways of successfully addressing the situation. Other than Cyprus’ economy being tiny, all of this was underreported or unreported.

Why? Some of it was due to various types of errors. Some people did not know all of the important facts. Some people forgot some of the important facts. Some people were distracted by less important or unimportant information. Some people failed to think ahead well. Some of it was done to create a bigger stir. Everyone read, watch, or listen to the news now! Cyprus may lead to another financial crisis! Properly reported, the story was not nearly as exciting.

Question whether the story is really as important as it is presented to be. It may be significantly or largely geared toward attracting readers, viewers, or listeners versus conveying the facts.

Be Aware of Propaganda

Propaganda is not just a foreign phenomenon. It exists in abundance in the U.S. It is more subtle here than it is in some other countries. In this way, it is more destructive here. Some articles and stories have a pro-American bias. Be on the lookout for this. Often, the author does not realize they are being biased. They are just repeating a falsehood that was passed along or unconsciously fitting in with their audience.

Health care here costs about twice as much as it does in like countries. This is due to things like poor preventative measures, over testing, other unwarranted procedures, over medicating, rather highly paid specialists, and too much end-of-life care for too little benefit. Yet, when compared to the populations of like countries, Americans have the lowest life expectancy. This is not a perspective. This is how it actually is. For this reason, longer-term health care company bonds are relatively unattractive.

The wide belief in America is that the U.S. has the best entrepreneurial environment in the world, or close to it. I have only seen one article or story on the topic that included detailed statistics. The article said the U.S. has a great entrepreneurial environment. However, per the statistics at the back of the article, in comparison to other countries, the U.S. had a similar percentage of successful entrepreneurs and a greater percentage of failed entrepreneurs. All other statistics I have seen over the years indicated an extremely high failure rate. This is important information to know if you are invested or thinking of investing in a young enterprise.

Get some of your information from higher-quality non-U.S. sources. The source may be international, like the International Monetary Fund (IMF), the World Bank, or the Organization for Economic Co-operation and Development (OECD), or it may be a speaker(s) or author(s) from a specific foreign region or country. This will help you to separate propaganda from fact.
Some U.S. government sources are good at enabling you to see things more accurately too. The Federal Reserve (Fed), the Congressional Budget Office (CBO), and the Central Intelligence Agency (CIA) World Factbook are among these sources.

Be Aware of the Influence of Censorship

I had one online message censored because it was critical of the U.S. government. I had another online message censored because it was critical of corporations. I had at least one other similar experience. Nothing I said in any case warranted censorship. I had to put in extra effort to get certain articles published because the articles were contrary to other people’s financial agendas. (None of this happened on LearnBonds.) Other people have shared same or similar experiences with me.

You do not see or hear certain articles, comments, messages, or stories―or you only see or hear them in an unwarrantedly altered state. In various ways, money too often decides what gets published and broadcast. Try to mentally adjust for this as you consume investment and other news.

Rate Sources Based on Their Track Record, Not on Their Reputation

It is good to give a source a chance based on reputation; but, not too long thereafter, reputation no longer matters. You can see and/or hear if the source is knowledgeable, intelligent, skilled, diligent, or ethical. Judge your sources based on their track record, not on their reputation.

Consume a Good Amount of Non-Investment News Too

You cannot understand the investment world well if you do not have a fairly good understanding of the world in general. Knowledge without good context can be dangerous. Besides, it is better to be somewhat well-rounded.

Conclusion

Being good at all of the above requires a very large amount of practice. You will never be great at all of it. No one is great at all of it. It is too difficult to master. It is important to attempt to be good though. The attempt is a lifelong pursuit that is rewarding financially, intellectually, and otherwise.

 

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