Some things don’t change in the financial media. I remember living in Mauritius at the time of the Greek financial crisis. Only a couple of English language television stations and limited internet meant I would spend a bit of time watching news services and seeing how the EU was going to deal with things. One day the markets would rise and the headlines and stories would comment that that things were being resolved and the uncertainty would be over. Then the next day the markets would go down. You guessed it, because they were unsure if bailouts would happen. This cycle went on for weeks.
Years later and we have moved on to the next crisis, the global pandemic. The markets are making even less sense at the moment. Record high jobless numbers, business closures and government stimulus payments. Combined with record high US market indices this is not a normal situation.
The financial media still needs to write lines or fill minutes every day. Their analysis of the markets makes even less sense than the actual market movements. Markets are up because consumer confidence is up and businesses are being allowed to re-open. Next day the markets are down because a new outbreak was found and businesses are having to close. Sound familiar? Just a year or two ago you could insert trade war with China into those sentences above and it would be exactly the same.
In Gregory Zuckerman’s book, The Man Who Solved The Market about the Renaissance Technologies hedge fund, he quotes CEO Peter Brown as saying, “Anytime you hear the financial experts talking about how the market went up because of such and such – remember it’s all nonsense.” This coming from the CEO of one of the most successful hedge funds.
You may think it’s just a sign of the 24 hour news cycles we now have thanks to the internet. Sadly that is not the only reason. Sure, as I said above, the media is under a lot of pressure each day to explain why certain things happened. What makes the problem worse is everyone now has a voice. Initially it was trading chat rooms. Now it is anyone with a social media account or blog. It is more difficult now to spot the hypesters because there are just so many of them. The pump and dump schemes have gone high tech.
Now you are probably thinking, well, I will just rely on my broker’s recommendations. They might have access to better quality data and give a slightly more informed opinion on what to buy and sell. Just remember, brokers make money on the buys and sells. They take a brokerage fee when you buy something. They also take a brokerage fee when you sell something, regardless of whether it went up or down. They would like you to make a profit, however, that is not their primary aim when making buy or sell recommendations.
In the end as a trader you will still have to keep abreast of the markets and scan the financial news. Just remember to consider the source and their agenda. It might not be as hidden as they think.
Stop always believing the financial news
- Do you remember to consider the agenda behind financial news?
- Are you able to separate the signal from the noise with finance articles?