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I’M MANAGING MY MONEY with an eye to making it last another three decades. And yet, everywhere I turn, it seems somebody’s insisting I pay attention to what’s happening in the financial markets right now.
This isn’t just a coronavirus phenomenon. It is, alas, standard operating procedure for the financial media.
I understand the game. I’ve spent most of my career as a journalist, so I realize it’s no small undertaking to fill up a newspaper, the airwaves or a website every day. Daily market stories are not only reliable fodder, but also they grab readers’ attention. Still, couldn’t the media do just a little bit better?
I may be casting stones, but I’m not without sin. Over the years, I’ve written stories that have been bad for readers’ financial health. Watching, reading or listening to a financial journalist? Try slotting his or her reporting into one of seven categories, ranging from dangerous to enlightening:
1. Daily updates. The media’s constant recounting of the day’s market action isn’t just useless, it’s damaging. The breathless reporting about which way markets are heading, and which stocks are hot, plays to investors’ worst instincts, turning our multi-decade investment time horizon into an emotional time horizon measured in minutes.
In all this, Wall Street’s talking heads are eager co-conspirators. In return for a little airtime, they’ll happily parse the day’s market entrails, telling us what the market “thinks.” Ask yourself: How could these clowns possibly know what millions of investors are thinking?
The vapid commentary also fails basic math: Yes, billions of dollars of securities might be sold because investors spy reasons for pessimism in the latest economic data—but the exact same dollar value was bought by those who have reached the opposite conclusion. Want to know who never gets mentioned? The vast majority of investors, who didn’t buy or sell, and likely won’t do much of anything in the months ahead.
2. Trend stories. Instead of dwelling on today’s market action, reporters might detail what’s happened over the past year or the past five years. This is a tad better: Five years isn’t exactly long-term, but it’s a whole lot better than harping on today’s market gyrations.
That said, in reporting what’s happened over the past year or past five years, there’s the implicit assumption that this tells us something about the future. But what does it tell us? Depending on the reporter’s bias and the talking heads quoted, we’re led to believe that either the trend is our friend or a reversal is imminent. How about the possibility that past price movements tell us nothing about the future—and that future returns will depend on economic and other news that’s not yet known? Nah, you’ll never read that.
3. Market analysis. Instead of simply recounting what’s happened recently to share prices or interest rates, a reporter might go a step further, pontificating about the market’s valuations or its economic underpinnings. At least the reporter isn’t imagining that he or she can divine the future simply by looking at a chart of recent price movements, so this sort of thing deserves a C for effort.
Why not a B-? Problem is, investors are already aware of market valuations and economic data, so this information is likely fully reflected in stock and bond prices. Such commentary may help us to have a richer understanding of the issues that investors are grappling with and the risks we face. But it won’t tell us how markets will perform in the months and years ahead.
4. Portfolio building. Reading a story about how to put together the right mix of investments? That’s a sign that a reporter is emerging from the primordial financial swamp and starting to walk upright. He or she is grappling with what might make sensible long-term investments and how they could fit into an investor’s overall portfolio. To be sure, the reporter might foolishly suggest that the investments touted will beat the market averages. Still, it’s a heck of a lot better than pontificating about the stock or bond market’s direction.
5. Personal finance. The financial markets change every trading day, so there’s always a news hook on which the media can hang an investment story. By contrast, our need for insurance and an estate plan, or the importance of saving regularly, limiting debt and controlling taxes, doesn’t change much from year to year—if it changes at all.
Yet these are topics where financial journalists can add real value. The problem: They don’t have the immediacy of a market plunge, so editors are reluctant to run such stories, unless it’s a slow news day.
6. Big picture. We often think of our financial life as a series of buckets: career, house, credit cards, portfolio, student loans, insurance, estate plan and so on. But to be savvy managers of our own money, we need to look across these buckets and see the connections between them.
Should we pay off debt rather than stash money in a savings account? Should we raise the deductibles on our homeowner’s insurance because our growing wealth means we could easily afford a $5,000 deductible? Should we put less in the kids’ 529 plans because our own retirement savings are on the skimpy side? To be fair, it’s difficult for the media to tackle such topics in an 800-word article or a three-minute television segment. Still, this is the sort of journalism that can be invaluable to everyday investors.
7. Money and life. How can we get ourselves to make the sacrifices required today so we have a better financial life tomorrow? How can we revamp our finances so they cause us less worry? How can we use our dollars to make our days happier and more fulfilling?
We all want our money to enhance our life, rather than leave us with a gnawing sense of anxiety—and the media can help. Where to begin? Step No. 1: Stop telling me about today’s market action.
Follow Jonathan on Twitter @ClementsMoney and on Facebook. His most recent articles include Don’t Lose It, Stand Your Ground, Four Questions and Rule the Roost.
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To me, worse than the “talking heads” on the daily updates is the offhand manner newscasters — say, on an hourly radio newscast — will attribute stock market movement to whatever is the big story of the day. Also, if I am going to get a daily update, please express index and stock price changes in terms of percentages. I can’t relate as much to absolute value changes.
During times like these—-amidst wild market gyrations—-I find it helpful to remember that what passes for business and financial “news” on CNBC, Fox Business and the like is, in fact, business entertainment—–nothing more and nothing less.
Remember that “financial journalists” are journalists first and some are totally ignorant of how money and wealth work. I’ll wager that most of them when they first graduated from J-school couldn’t reconcile a checkbook.
Thoughtful insights, as always. Amusingly, the SP500 is still well above long-term CAPE and other measures of market value, despite all the red and associated media hyperventilation. A few market segments are starting to look more affordable whether you’re still in the acquire phase or are rebalancing. Another gap in reporting: This is NOT Ebola (whew), we’ve known the full virus sequence for a while now (well done, China), and clinical trials are already running to find ideal anti-viral and anti-inflammation treatments for those few who develop a more serious case of covid-19 from the virus.