The market makes the news — not the other way around.

Far too many investors fail to understand that. When the news is very negative, its usually AFTER the market has been deeply whacked. They are reporting what has already occurred; That’s their jobs.

My goal here isn’t to bash the Press (that stuff is silly). Rather, it is to show you that the media is not telling you what is most probably going to happen next. To investors, news mostly old — its pretty much history as far as sock prices are concerned. What matters most to your portfolio is what the near future holds.

As an example, consider this collection of Time Magazine covers.

Click through for 30 years of Time Magazine Covers.

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Incidentally, I do not know the original author — this has been circulating via email for some time. If anyone has a clue, please mention it in the comments.

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Previously:
Apprenticed Investor: Lose the News
The Street.com, 06/16/05

http://www.thestreet.com/_tscana/comment/barryritholtz/10228215.html

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “30 Years of Time Magazine Covers & the Stock Market”

  1. jmborchers says:

    Market just took a terrible dive and I didn’t even flinch or consider buying puts. I said bring it on! LOL.

  2. Andy Tabbo says:

    I’m supposing there’s an opposite presentation showing the bullish covers and the subsequent whooshes lower…the Bezo’s Cover in 2000 stands out. The glowing covers of China and Bric countries in 2006 and 2007 also stand out in my mind.

    - AT

  3. slappy says:

    also this is on ly the last 30 years…. where are the time covers from 1920-1950? they would have shown amazing prescience

    my guess is that they would have been just as useless a predictor, but on the other side, simply because we never had a protracted 10+ year bear market in that time period.

  4. Agreed — there definitely some data mining going on here

    Still, I thought the general concept was interesting

    And mad props to Adobe for the PDF embed

  5. DMR says:

    Umm, no correlation would be a better statement than saying that it lags. Time’s readership base is not made up of traders. While total earnings in the economy matter to an investor, total revenue (i.e. toplines) are more pertinent to the hiring decisions of companies, and so, indirectly to the wages that impact most people. To a laid off worker in the early 2000s, it didn’t matter that profits were up sharply. This would be like wrongly saying that the fuel gauge is a lagging indicator of your car’s speed. Unless it shows empty, it shouldn’t have any relationship to speed.

  6. roncfp says:

    Bravo Barry! I posted in the “Everybody Back in the Pool” article about this very same thing. The media and many “supposed experts” tend to extrapolate the current well into the future. The inflection points are nearly impossible to “get right.” You can actually see covers dating back to 1923.

  7. dead hobo says:

    BR wrote:

    My goal here isn’t to bash the Press (that stuff is silly). Rather, it is to show you that the media is not telling you what is most probably going to happen next.
    _________________________________________________________________________

    Reply: On one level you are correct, bashing the press is like complaining that water is wet. No matter what you say, nothing will change the characteristics of either.

    On the other hand, a little fact based ridicule can’t hurt and might help make the press a little less corrupt and/or aggressively stupid for a while. Press relations is a common tool of common manipulators. The press obliges and goes along if it can be made into a story that attracts eyeballs and advertisers. The public is mostly ignorant and intellectually lazy and still believes what it reads on the internet, or in the paper, or sees on television. Thinking is for losers.

    The TARP will beget scams of legendary proportion, I am sure. The press will accept any sad story uncritically and tacitly support the fraudsters. Or they will add credibility to a fraudster by asking some dunce to politely tell another side of the story, treating scamster as credible instead of as a thief.

    Well, I plan to use the incompetence of the press to scare hedge fund investors into selling out NOW before the market goes EVEN LOWER! If people with money are stupid, then I plan to help with their education. SELL OR DIE! THE MARKET IS GOING to 5000. TODAY!

  8. Stav says:

    This was done by a mutual funds company. The Hartford does one just like this in paper form.

  9. Jim Dandy says:

    I think it is a nice idea, however the ‘market returns’ data, especially for the ’70s, should include some caveat about inflation. Most of doubling of market value from the early ’70s to ’80s was probably just inflation (at 10% it takes 7 years). It makes the performance in the mid ’80s and ’90s even more impressive too.

  10. KidDynamite says:

    this is pretty weak – i mean, wasn’t it a law, up until this year, that the market was ALWAYS higher 10 years later? kinda like how the S&P ratings analysts couldn’t put a negative number in their models for change in housing prices…

    alas, this “ten years later the market was higher” crap won’t work anymore…

  11. DL says:

    Sure, it’s highly probable that in nominal terms, the S&P will be higher in ten years.

    If I had to “buy and hold” something for ten years, I’d probably rather go with a 1:1 mix of GLD and USO, than to go with SPY.

    (However, my views as to what will happen in ten years have nothing whatsoever to do with my investment stance today).

  12. Gabriel says:

    SPY
    1998 : $125 || 2008 : $85

    10 years is a long time – nobody can predict what will happen by then.

  13. larrysalzman says:

    This appears to be the same material Weston Wellington at DFA has been using for some time…maybe he’s copied it from somewhere else, but that’s my guess as to the source.

  14. Jojo99 says:

    Clearly, this is just something from someone who was trying to push stock buying. Probably some financial firm trying to pump their sales in a down environment. How about looking at bullish ocvers and related follow-on performance?

    As Barry says, what you read in the MSM press is after-the-fact and indicates nothing.

  15. LB says:

    I wish is someone could present the Japanese version of this… That will be a something like a black swan.

    LB

  16. howard432 says:

    Long time commodities guy: one of the first seminars I went to that was conducted by a tried and true trader who “taught” me this one: “If a sack of sugar is on the cover of Time Magazine it’s time to get out of sugar.” I get from this that the opposite is also true. I was also trained for a few weeks by Zwieg (Zwieg-Davis) when he was the hottest of the hot and he told us that the best market indicator for him were the ads in Barrons; if all were long it was over, if all were negative the bottom had past. Your commenters that are observing the ten year rule are correct, another way of saying that it all depends on when you got in. If you measure from after the real crash in ’31 you made money, but God help you if you got in the day before the market crashed.