Yesterday, I discussed why the Barrons vs Cramer debate was irrelevant, and why people should never invest based on what they watch on TV.

A number of commentors observed that despite the many exhortations to think of television as merely entertainment, many a fool are still watching Mad Money for investing insights.

When I wrote the Lose the News column, I referenced Neal Frankle’s book, Why Smart People Lose a Fortune. Given that so many people still haven’t figured out what TV and the finacial press are for, perhaps its time to revisit the charts from Frankle’s book:

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Lose the News: A Graphic Depiction

All charts via Why Smart People Lose a Fortune

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Previously:
Barron’s vs. Cramer, Part II (February 2009)

http://www.ritholtz.com/blog/2009/02/barrons-vs-cramer-part-ii/

Sources:
Apprenticed Investor: Lose the News
Barry Ritholtz
The Street.com, June 16 2005

http://www.thestreet.com/story/10228215/1/apprenticed-investor-lose-the-news.html

Source:
Cramer’s Star Outshines His Stock Picks
BILL ALPERT
Barron’s FEBRUARY 7, 2009

http://online.barrons.com/article/SB123397107399659271.html

Category: Apprenticed Investor, Financial Press, 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.

18 Responses to “Investing via Media Market Timing”

  1. thedocument says:

    The same goes for other assets, like gold. All the calls for $1000 gold recently have me thinking we see one more washout before the bull returns.

  2. jc says:

    OT, Maria B is rerunning the Ken Lewis “interview” pimping BAC to a bigger audience on NBC after rerunning this interview ad nauseam on CNBC. This free publicity campaign comes after Lewis bought $1M BAC stock on Wed. A bunch of BAC directors bought the same day.

    There is no disclosure in the interview although a CNBC dolly pointed out that Lewis picked up $250K with his timely purchase/interview. I’m too old to be naiive about ethics but…CNBC is really a joke and I guess Maria’s show on NBC is just a variation – just think of this as a BAC informercial for their stock.

    This weeks bank bailout du jour is going to face a ton of public resistance.

    Lewis in his fireside chat with Maria was moaning about the $500K salary cap.MS & GS are going to get out of that trap ASAP and will be pirating the Merrill rainmakers. Lewis just overpaid 70% or whatever for the ML name, their big producers are fleeing and will be replaced by legions of low-salaried BAC order takers. Mission accomplished!

  3. mark mchugh says:

    There’s a very good case point about the media, and investment results unfolding right now. In the last weekor so, five (count ‘em, five) of the Primary Dealers have raised their gold price targets in the last two weeks. Goldman, Merrill, UBS, Deutsche Bank, & Morgan Stanley.

    Does anyone out there think these guys are in the business of offering friendly advise to the huddled masses? Sprinkle on top the Super Bowl commercial, Cramer and Pete Najarian’ recent recommendations and you’ve got all the ingredients for a turd sundae.

    Enjoy!

  4. adamj says:

    The truth of the matter is Headlines are not contrary indications and are also not good investment advice. Just as someone can show all the headlines that are contrary, people can also find headlines that seemed spot on. The fact of the matter is there ARE NUMEROUS different national magazines often saying the OPPOSITE thing. The only thing they are good for is reading as much as you can from DIFFERENT sources to see what supporting FACTS they contain and making YOUR OWN DECISIONS.

  5. JMH says:

    The notion that investment oriented media may be more influenced by the need for ratings than the need for accuracy isn’t going to be much of a surprise to anyone on this site. But I will pose a different question: How well does the “full service” retail brokerage / financial services industry serve its clients? of the many retail brokers I have met, I know of only two who were consistent in their ability to make money independent of market conditions. One became a private investor, and the other would never be introduced to the retail client unless the client asked for a broker who can produce a documented track record. In addition, the client would have to feel comfortable with a derivative product strategy that would be considered quite unorthodox in the retail world.

    What future does the “full service” retail brokerage industry have in the internet age? Do “full service” retail brokers give advice that is quantitatively better than the ratings/circulation influenced commentary in TV and print media? I think the investment advice offered to “full service” retail brokerage customers is generally abysmal. If it were of any value, there probably wouldn’t be as much interest in investment oriented magazines and TV.

    Much as the music industry has to accept the al la carte single track model, I am guessing the retail brokerage industry will be force to restructure, since its current practices and incentives are contrary to the interest of the individual retail client. This environment encourages the creation of competitive alternatives we see emerging on the internet.

  6. RW says:

    JMH:

    The conflicts of interest run pretty deep and, even before the repeal of Glass-Steagell, the relative weakness of barriers between enterprises could be troubling. Now, as Bill Cara phrases it, the large brokerage/banks can act simultaneously as: Banker (a safe-keeper and credit-issuer); broker (an agent); advisor (a professional); and dealer (a producer of sales product).

    Now add to that bubbling cauldron the seldom discussed fact that this custodian-creditor-agent-advisor-salesperson has knowledge of a client’s financial information plus a degree of control over the clients assets and is also a trader who can use its own proprietary capital to trade against the client* and you have a real witches brew.

    The ability of large financial institutions to prevent legislation that splits these functions appropriately virtually guarantees that any regulation will basically be a band-aid over a gangrenous wound.

    *trading against an individual client could be prosecuted as front-running (if the agent were caught) but when all client transactions are in the corporate database and a separate unit of the bank/broker is trading with knowledge of those aggregate transactions I doubt even the best financial prosecutor in the business could make a case stick.

  7. Charlatan says:

    BR, a few weeks ago, you posted a video in which Cramer really flubbed the whole housing situation (”subprime is no big deal” etc.). The video was inexplicably pulled within minutes. Two Questions:

    (1) Did you post that video purely for our entertainment, or were you also seeking to provide a more accurate portrayal of Cramer than we get from the mainstream media?

    (2) If the video had shown Cramer making a good call, would it have been inexplicably pulled?

    ~~~

    BR: On Typepad, I occasionally suffered from premature posting. The scheduling issue with Wrod Press is much simpler, and for whatever reason, less prone to accidental ejaculation posting.

    Also, I am trying to steer clear of too many Cramer posts, as he is not how I want to define myself. That said, the Barrons vs Cramer is a fascinating and instructive discussion . . . its quite educational.

  8. JustinTheSkeptic says:

    Whatever, I’m buying more gold and silver on the dips and not selling any until 2010. Gold, like Oil before it is finally being recognized for what it is worth – a hedge against the currency madness that is just now going to start to show its ugly head.

  9. AGG says:

    So tell me, when you walk by a magazine and newspaper stand around 8:30 in the morning, what goes through your mind?
    I mean besides the fact that breakfast bagel was too tough?
    Gee, that stand looks lonely today. Where’s the hustle and bustle? Market timing? Put a pedestrian traffic counter on wall street.

  10. AGG says:

    Smart people can lose fortunes because making or losing a fortune on wall street is the product of luck, not brains. I’m referring to honest traders. The hidden fee crooks do make fortunes with their brains. Those people ruin it for everyone else. It took over 50 years for people to get over their fear and distrust of wall street. Now the crooks have trashed good will again. And all for a quick buck. Short term smarts equal long term stupidity.

    ~~~

    BR: Luck never hurts, but I know too many smart successful traders/fund managers to believe its purely random.

  11. constantnormal says:

    So what are the MSM saying today?

    Are the markets ready to tank, or is the bottom in and only blue skies above?

  12. MikeKennedy says:

    It’s actually as simple as trading the tone of Bob Pisani and Maria Bartiromo. Especially Pisani. If you just fade either the euphoria or “the sky is falling”, it’s a winner, guaranteed. Why wait for the magazines?

  13. TrickStyle says:

    I suspect it’s possible to pull quotes from the very same sources that argues the exact opposite position. Which further supports the argument to lose the news, I suppose.

  14. royrogers says:

    another one of BR’s circumstantial media indicators that have no basis on
    statistiscal science.
    At any moment in time, there are many bullish and bearish commentaries,
    and even if all the commentary is bearish, it does not indicate that at the moment,
    the markets are ready to run up.

  15. H.T. says:

    Anyone who read Taleb’s first book, ‘Fooled by Randomness’ would have learned to ignore financial media for better financial health.

    However i have to agree with some of the posts above re: said host’s own flip-flops etc etc–so i guess this media post piece means you’re all in, right Barry?

  16. hawleyl says:

    In physics there is an “uncertainty principle”. This principle applies to measuring phenomena. I like to apply a corollary that states the more you interact with something, the less certain you are of what you are measuring. For example if you ask 100 people to measure the air pressure in a time, the resulting average may be the tire pressure at the time the 50th person did a measurement (since a bit of air escapes on each measurement). So once a “fact” is published and multitudes of people interact based on the “fact” (that lives in the past), the basis for the “fact” (in the present) has changed.

    I like this blog because it helps with strategic planning as opposed to tactical operations.

  17. timbuck2 says:

    Must go for ‘newsletter writers” as well. Its always easy when you are looking back to cherry pick your agenda……..seems to be a pattern with you BR.

  18. AGG says:

    BR: Luck never hurts, but I know too many smart successful traders/fund managers to believe its purely random.
    In order to truely test whether the “market” is random, you’d have to be the Supreme Being. But let’s say that the correct definition of smart successful traders/fund managers is a person who doesn’t lie to his clients (ever) for added profit, does attempt to make a market with his client’s stock to help his clients, never front runs, never charges fees off client’s losses, never jacks up fees on client gains and never makes use of inside information, then I would say that from a monetary profit point of view, if this person becomes wealthy, it’s mainly from luck. I maintain that the greater fool theory rules wall street and is what eventually causes the crashes. They just can’t seem to be satisfied with modesty and honesty. So they charge ahead and pretty soon you have a herd of bulls charging right off a cliff along with their clients. Everybody else is doing it is part of the problem. Then again, I’ve always worked hard but I’m neither rich nor ambitious so I just don’t get it. I’ve piloted multimillion dollar aircraft but I could never justify owning one. I emember in 1983 when Microsoft launched realizing that it was going to go places but I never bought a share. I “invested” in my wife and kids and furthering my education. I’m not sorry.