The Financial Media is neither friend nor foe . .
. . . just remember they have to produce content 24/7/365. Issue #1
Why Financial Media Isn’t There to Help You
When I was managing clients’ portfolios, the most common question I got was:
“Should I be worried about this?”
That question — usually accompanied by a CNBC article, a dramatic-looking chart, or worse yet a TikTok — is a great example that financial media are very good at what they do. But what do they do?
The Business They’re Actually In
Here’s something that I learned early in my career: Financial media is not really in the information business.
It’s in the attention business.
Their job is not to help you become a better long-term investor. Their job is to keep you watching, clicking, refreshing, coming back tomorrow – and worrying. Because that’s how they get paid.
Advertisers don’t pay for calm, measured analysis. They pay for eyeballs. And eyeballs show up when people feel something — usually fear or greed.
Those just happen to be the two emotions that lead investors to make the worst possible decisions at the worst possible time
This isn’t a conspiracy. Nobody at Bloomberg or CNBC wakes up in the morning thinking, “How can I mislead investors today?”
Most of financial media people are smart and hardworking. But their incentives are completely different from yours.
A thoughtful piece that says:
“Markets are reasonably valued and the near-term outlook is uncertain.”
…might get a few polite clicks.
A segment that says:
“A Recession Could Be Right Around the Corner”
…gets people texting their spouses, checking their 401(k)s, and staying through the commercial break.
Over time, one of those business models survives. The other doesn’t.
Once you understand that a lot of what you see in financial media starts to make a whole lot more sense.
And sometimes the financial media is right. But you can’t just assume that.
How That Shapes What You Read and Watch
Here are a few tricks of the trade:
Everything is “historic.”
If you pay attention to headlines long enough, you’ll notice that something “historic” seems to happen about every three weeks.
Historic rally.
Historic selloff.
Historic volatility.
If everything is historic, nothing is.
Most of the time, the market is doing something pretty normal somewhere in a pretty normal economic cycle.
But “Markets Behaving Normally” doesn’t keep you glued to the screen.
Expert theater fills the airtime.
Turn on financial television and you’ll see two analysts:
One, explaining why the market is headed higher. Another explaining why it’s about to fall apart.
They’re both there for the same reason:
Conflict is interesting.
Agreement is boring.
The goal is to create a segment worth watching — not necessarily to give you something you should base an investment decision on.
Stories need villains.
In reality, a Federal Reserve rate decision is a bunch of economists trying to make the best call they can with incomplete information.
That’s not much of a story.
“The Fed Just Declared War on Your Savings”
Now that’s a story.
Financial media has to turn complicated, uncertain economic reality into something simple enough to fit into a 90-second segment.
Usually with heroes.
Usually with villains.
Almost always with more certainty than actually exists.
Whatever just happened is now the future.
Three up days? Bull market is back.
Three down days? Recession incoming.
I’ve watched this movie over and over again for forty years. Whatever the market did last is assumed to be what it’s going to keep doing.
Because recency feels real. And nuance doesn’t make for great television.
What It Looked Like from My Side of the Desk
Anytime I read “The so-and-so who predicted the 1987 crash says . . .” I know that he has a pretty good PR person. And I’m pretty sure that he hasn’t made a correct prediction since 1987.
How about “Higher inflation COULD cause the Fed to loosen”? Yes, it could. It might, even. But it might not. There is no financial or economic indicator that is foolproof. Or we’d all be rich.
“XYZ stock was down today because it missed analysts’ earnings estimates”. Guess what? The company earned what it earned, and the analysts were just wrong. Maybe follow the company more closely and depend on the analysts a little less.
DISCLAIMER: I spent more than four years of my career as an equity analyst. Analysts, as a group, are very smart. But at any given time, you can find multiple analysts who disagree and can make a darn good case that they are right and the guy at the other firm is an idiot. And no one is right all the time. Trust me on this.
I’m not saying any of this because I think investors are gullible.
I’ve seen plenty of smart, successful people get pushed into bad decisions by what they were reading or watching — not because they didn’t know better, but because the content was professionally designed to feel urgent and persuasive.
The 30-Second Filter I Use
Anytime I see a financial headline that sounds dramatic, I run through the same quick checklist:
1. Who is telling me this — and how do they get paid?
2. What emotion is this trying to trigger – Fear or Greed?
3. What would have to be true for this to be wrong?
4. What do the actual numbers say — before anyone tells me what they mean?
None of this requires expertise.
It just requires a habit.
I Still Read the Stuff
I consume financial media every day. I always have and I probably always will.
But the goal isn’t to trust it — or to distrust it.
It’s to become independent of it.
There’s a big difference between:
An investor who reads a headline and feels their pulse quicken…
…and one who reads the exact same headline, runs it through a quick mental filter, and decides whether it actually deserves a response.
The first investor is being managed by the media.
The second is managing themselves and in my experience, the second one usually comes out ahead.
Going forward, I’ll be posting about the nature of investments, the stock market, the economy, and the people and their egos who make it all happen. I hope you’ll find my posts useful, interesting, and even entertaining and keep reading.
What are some questions you have? Drop them in the comments and I’ll address them in the future. And for you clever readers, no “The Ward on the Street” is not something you should be worried about.