Don’t let fear and fallacy frustrate your financial plan
Have you seen this headline? Stocks rise on US-China trade optimism. How about this one? Stocks fall on US-China trade pessimism. Markets go up: Trade Talks. Markets go down: TRADE WAR! The subject has become the financial media’s go-to crutch for just about any move in global equity markets. At the time of this writing, US-China trade negotiations have entered Day 290 without a resolution. Is an end in sight? I’ll let the fund companies stick to writing predictions on when and how this saga unfolds as I am in no position to foresee the future (and neither are they, but don’t tell them).
This topic has provided a fresh reminder on the financial media’s responsibility to the individual investor: They do not have one. Media is business, and businesses exist to make a profit. Regardless of how this situation plays out, their business is to squeeze as much juice from the lemon as possible and then move on to the next crisis du jour. If we all stopped clicking US-China content after the first 30 days, they would have undoubtedly found a new fire to douse with gasoline.
Fear is an undefeated theme when it comes to gathering eyeballs. The chart below shows the correlation between market volatility and CNBC’s ratings during the Great Recession. In times of uncertainty, the world apparently turns to Jim Cramer. But as long-term investors know, the good years outnumber the bad ones. So, what do they sell during an economic recovery and period of robust returns? More fear, of course! When the fear of suffering loss narrative starts to run on fumes, they pivot to the fear of missing out. *Poof* just like that, articles about how “the easy money has been made” are replaced by “if you bought (fill in random stock) in 2007, here’s how much you would have now”. Suddenly, “Dr. Doom” Nouriel Roubini1 segments are replaced by an interview with Justin, a.k.a. “Crypto Kid.”2 It seems that the longer we go without a recession, the kookier the headlines.
Time for us to have a little fun. I’ve compiled 25 financial headlines spanning from December through today. But there’s a catch – some of the headlines I’ve completely made up. How well can you point out what is real and what is fake?
Disclosure: The following 25 headlines, regardless if they were actually posted or fabricated, are pretty ridiculous.
- Dec 3, 2018: Stocks close higher as S&P 500 has best start to December since 2010 on trade-war truce
- Dec 7, 2018: S&P 500 closes in an official ‘death cross,’ a chart pattern that could signal more pain ahead
- Dec 12, 2018: After the ‘death cross’, the S&P 500 seems to be forming a new ‘birth crucifix’
- Dec 24, 2018: U.S. stocks enter bear market for the first time since 2011
- Dec 31, 2018: Investor Roundtable: Top strategists all predict stocks will perform close to their historical average in 2019, but leave the door open to backtrack in case they are wrong
- Jan 5, 2019: Bet Against Buffett? Why the return of low carb diets could lead to the demise of Dairy Queen
- Jan 10, 2019: Government shutdown threatens to be longer and more painful as it moves into uncharted territory
- Jan 18, 2019: Seems like investors just overreacted—big time—when they dumped all that stock
- Jan 23, 2019: Elizabeth Warren proposes new 99% tax on billionaires
- Jan 30, 2019: Dow 25K! Here’s what it says about the stock market
- Jan 31, 2019: The ultra-rich are investing differently in 2019 — and it includes cannabis
- Feb 1, 2019: “This time is definitely different”: Krugman forecasts upcoming recession for the 93rd month in a row
- Feb 5, 2019: Nearly 75 percent of Americans consider people with debt undateable: Study
- Feb 11, 2019: Don’t believe the bounce, stocks are heading back to December lows, strategist says
- Feb 19, 2019: Want to be rich? This Fortune 500 CEO only needs 45 minutes of sleep each night and 15 other morning routine secrets
- Mar 2, 2019: Sell in March and Go Away? 9 reasons why cash could be king in 2019
- Mar 15, 2019: These are the 10 best countries in the world in 2019 – And the U.S. doesn’t crack the top 5
- Mar 26, 2019: What the Yield Curve Says About the 2020 Presidential Election
- Mar 31, 2019: Could Elon Musk’s rap song actually be good news about Tesla’s quarterly deliveries?
- Apr 3, 2019: U.S. stocks ‘vulnerable to a correction,’ warns top asset manager
- Apr 6, 2019: This Bull Market Has No Expiration Date
- Apr 9, 2019: 7 Ways to Invest like Tywin Lannister
- Apr 11, 2018: How the Stock Market Rally Could End
- Apr 20, 2019: Record Inflows for New Crypto & Weed Hedge Fund
- Apr 22, 2018: Life Hack: If you stick to a plan wherein capitalism and financial markets prevail in the long run over short term speculation, you will never need to worry about headlines
- REAL. Of course, I had to lead off with the never-ending headline of 2018-19.
- REAL. So, I guess this was a thing? Death Cross sounds like the name of the next Jason Statham movie.
- FAKE. The December 2018 Bear Market will be conveniently forgotten, much like the preceding bear market in 2011. Nothing can get in the way of ‘longest bull market ever’ headlines.
- FAKE. Like clockwork, you can count on these articles every January.
- REAL. Oh, thanks MarketWatch! Now what would cause investors to overreact?
- FAKE. All in good fun, my friends on the left.
- FAKE. This is only half-false. This headline was from Jan 5, 2018 when the Dow crossed 25,000 the first of three times. President Trump tweeted congratulations and that it was a tremendous event all three times. All in good fun, my friends on the right.
- REAL. I am yet to see this, but if they say so…
- FAKE. It was only 86 months in a row.
- REAL. Maybe this explains why U.S. fertility rates have hit a 30-year low?
- FAKE. The morning routine articles jumped the shark a long time ago. Not sleeping has become a badge of honor. We are desperately in need of some self-made billionaires who wake up at 10 a.m.
- REAL. Reason No. 5,936 that you should not believe every survey on the internet.
- REAL. I would welcome another 290 days of US-China trade headlines if it meant I did not have to see any about the “2020 Election and Markets”.
- REAL. If you don’t believe me: https://soundcloud.com/user-209448905
- REAL. Seattle ‘vulnerable to rain,’ warns top weatherman.
- FAKE. Had to sneak a Game of Thrones reference in here somehow.
- FAKE. By far the most important, yet boring of the 25 headlines. Anti-clickbait.