What If You Only Hear One Side of the Story?

Perspective is key.

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In the world of investing, accurate and timely information is a valuable resource. It shapes opinions and helps investors make decisions which, in turn, change the markets. Unfortunately, many investors get the majority of their information from outlets whose main goal is to sell advertising rather than dispense solid advice.

One of the best ways to attract and keep viewers, listeners, and readers is to report bad news. The truth of the matter is that if good news were popular enough to get people to watch, there would be more of it. But it isn’t. News agencies have a business to run, and therefore choose the subjects that will boost their ratings.

Most economic or business stories have two sides, because all transactions involve two or more parties. For example, high food commodity prices are bad for consumers, but are good for farmers, agricultural machinery makers, and pension funds that invest in these companies. Manufacturing plants moving to developing companies are bad for US workers and their local economies, but are good for the new workers and for the consumers of those products who pay a lower price for the end products. A hurricane can be both a tragedy for those who lose property and a windfall for building contractors and building supply stores.

Often times, potential good economic news stories are replaced by bad news stories. When gas prices go up, it becomes a top news story. When gas prices are on the downward slope of their cycle, that story is replaced by debt fears in Europe or some other calamity of the day. If on the same day, it is announced that GDP growth is improving, but the unemployment rate ticks up (a phenomenon that is very normal in the early stages of a recovery), you can bet which statistic will be most reported.

Another sign that most media outlets are more interested in ratings than advice is the lack of historical context that accompanies their reporting. Have you ever read a report that said that stocks are down 5% for the month because of the most recent calamity, but not to worry because the stock market averages five of these drops per year? That revelation would only minimize next week’s top story.

Remember Paul Harvey’s “The rest of the story”? Wise investors recognize that what they take in from the media usually only covers half of the story. They dig deeper to discover the other side before shaping their opinions and decisions. Working with a trusted advisor can give you a perspective you won’t find on the evening news.

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