Don't get played by the financial Media


What is the purpose of financial news? Seriously, what purpose does it serve?

Some recent articles helped us reflect on this question.

The Abnormal Returns website[1] published an article warning us about getting played by the financial media.  We’ve republished key parts of their article below.

On some level it [financial news] provides us with a common base of knowledge so we can communicate with other people in the markets. Ben Hunt at Epsilon Theory recently wrote:

It’s not what the crowd believes. It’s what the crowd believes that the crowd believes. The power of a crowd seeing a crowd is one of the most awesome forces in human society. It topples governments. It launches Crusades. It builds cathedrals. And it darn sure moves markets.

Hunt goes on to talk about the mechanism by which this information is moved through the markets: financial media outlets like the Wall Street Journal, Financial Times, CNBC and Bloomberg. The problem is that beyond acquiring some base-line information, it is not altogether clear whether any of what you read is at all actionable. Stefan Cheplick writes:

I know no great investor who has ever attributed their success to news or headlines. If you know anyone who thinks like this, I will be straight up in awe…The money in headlines is shaking people out. It’s tricking them into dreams of grandeur, then shattering them. Headlines are glass castles.

Those glass castles can be expensive, as Cheplick notes how many newbie cryptocurrency traders got sucked into Bitcoin at the worst time possible. Another investor, Howard Lindzon makes a similar point:

This is the exact reason I gave up news/information from ALL of the above…They gave me ZERO edge. Turning them off completely is what finally gave me an edge.

This is due in part to the nature of the news, especially in today’s day and age, when headlines can be A/B tested to ensure the highest click through rates. Josh Brown at The Reformed Broker notes that the humdrum, everyday news doesn’t get published:

106,000 or so flights take off and land every single day, almost always without incident. That’s why it’s news when one doesn’t.  Market activity is much the same, almost every day represents a day without a crash…And so anything that has even the slightest imprimatur of potentially crash-y activity leads the headlines.

We can choose to engage the financial news on our own terms. Those terms should include a knowledge of how the game is played and how not to get played in the process.

To help us understand how to engage with the news in the current age, Art+ Marketing[2] provides a very helpful Consumption Guide.  Each of the six tiers of their pyramid is explained below.


RED: INFO-TOXIC-ATION | Media that brokers in falsehoods.

Media that makes you believe things that aren’t true [i.e. not fiction] will put inaccurate ideas into your head, which is inherently bad, because it distorts your understanding of the world.  The extreme packaging around news designed to hack attention creates an unending sense of urgency, which has been linked to various anxieties and other more dramatic issues.

ORANGE: CONSUMPTION | Media that is passively grazed, such as through an algorithmic or broadcast stream.

Heavy use of social media has been correlated with lots of unhappiness, in various forms, especially mobile usage.  The algorithms themselves currently favour falsehood over truth and make it hard to distinguish between the two.  Further, any algorithmic editorial function can be manipulated by hackers and social engineers of all sorts, from search engine optimization through to the foreign troll farms.

A recent survey from the American Psychological Association found that, for many Americans, “news consumption has a downside”:

“More than half of Americans say the news causes them stress, and many report feeling anxiety, fatigue or sleep loss as a result, the survey shows. Yet one in 10 adults checks the news every hour, and fully 20% of Americans report “constantly” monitoring their social media feeds — which often exposes them to the latest news headlines, whether they like it or not.”

Despite it making us feel worse, we seem to be hard wired to seek out new news, and the current environment exacerbates our existing tendencies.  So if the evidence suggests the news can stress people out, why do they keep going back for more? For one thing, it’s entertaining, Davey says.

The human brain is also wired to pay attention to information that scares or unsettles us— a concept known as “negativity bias“.  “In a state of nature, our survival depends on finding rewards and avoiding harm, but avoiding harm takes priority.”

YELLOW: INTERACTION | Media that allows for or requires interpersonal communications.

We all need to communicate and private interpersonal communication has been shown to make us feel better, regardless of platform.  While emails are useful and necessary they are also a significant source of anxiety and something that needs to be managed.

BLUE: PARTICIPATION | Media in which one chooses specific content to consume or is otherwise actively engaged in the content.

Choosing content is more satisfying than being fed it, but we are predisposed to binge, especially when life seems stressful.   Playing games is good for your brain and playing board games makes you smarter and better at being social, which has its own benefits [see GREEN].  Watching movies, even sad ones, can make you happier and fiction increases your empathy.

BROWN: EDIFICATION | Media which increases our moral and intellectual capabilities

Content where we learn something substantive, from science through hobbies to well researched peer reviewed journalism, tend to make us feel happier, if we think we learned something useful.

“It’s actually a core need for psychological wellbeing. Learning can help us build confidence and a sense of self-efficacy. It can also be a way of connecting with others too.”

GREEN: ACTUALIZATION | Media in which we seek our best selves.

We place this below edification and educational media because it operates more broadly, and we have begun to shift attention to direct improvement.

Self help books are the fastest growing segment of books, for example, as we all try to make ourselves better employees and successful capitalists. However this is to the detriment of wider media consumption, especially the arts, which help build the non-obvious connections needed to create ideas and enhances overall intelligence and empathy.

So, in some ways, the very difficulty of finding and decoding art and other people’s conversations, is what makes them more valuable, in terms of reported wellbeing and other desirable faculties.

Listening to music has a “very positive effect on wellbeing” and can even reduce back pain and help you sleep better. Going to concerts “directly links high levels of well-being with a lifespan increase of nine years.

“Our research showcases the profound impact gigs have on feelings of health, happiness and well-being.”

Deep conversations make you happier — and having friends correlates to a longer life and research shows “Unhappy people watch TV, happy people read/socialize”. Playing board games makes you smarter and is inherently social.  There are no known negative side effects to any of these GREEN activities, so binge away — no need for a cheat day.

Our hope at Stewart Partners is that next time you read a headline that causes you some level of anxiety or stress, the content on this article will help you to either (i) compartmentalise the message to understand what impact the author was seeking to have on you when they wrote the headline, (ii) make you consider where you go to access news, or better still, (iii) help you avoid reading the headline in the first place.  And that is especially true of the financial media, where an agenda of fear and greed is key to their business model.

Author: Rick Walker



Rick Walker