Markets and the Media
The 1st quarter of 2018 has come to a close and volatility has returned to the market. This is actually a good thing for investors as the markets need to find equilibrium over a longer period of time and a very good thing for our friends in the national media. I am blessed with five children, excuse me, now young adults and all have been interested and inquisitive about investing. If the Dow is up or down 200 or 300 points and I am asked about a news headline referring to the markets as “plummeting” or “plunging” and “soaring” or “surging” I often have to check and see if I missed something in my daily review of the markets.
As mentioned in many past comments, as the Dow rises, percentages compress so a 1000 point move when the Dow is at 10,000 is a 10% move, 1000 points at 20,000 is a 5% move and at 25,000, a 4% move. On the first day of New York Stock Exchange trading in 1990, 86 thousand trades were placed and 162 million shares traded. On the first day of trading in 2018, 3.8 million trades were placed and over 1 billion shares traded. The markets have more individual investors, 401k’s, pension plans, mutual funds, hedge funds and institutional investing than ever before. When you add computerized trading platforms with complex algorithms we must have an updated view towards market activity and understand that a 200 or 300 point move is going to be more normal than not.
So my answer to the media’s “breaking news” about the markets is my standard answer to many newsworthy questions posed by my children which is “Follow the Money”. It is not investor or Wall Street money, it is ratings and advertiser dollars. We clearly understand that the hopes and dreams of our clients are tied to the markets and this is very much an emotional area for investors. A rather dry market report stating that the market is normal is less likely to keep us tuned in during a commercial break than the use of inflated superlatives and flashing graphics. I certainly enjoy watching the news but in much smaller doses nowadays. My first 10 years in the business, I had a T.V. in my office but no longer and I feel I am much better at what I do by removing what I thought was information but in hindsight was more of a distraction. As with both television and the internet, information should never be confused with wisdom. Don’t get me wrong, if a network were to call and asked me to appear, I would be there and there are numerous commentators and reports that are most relevant and informative. However the reality is that news and business news is often less journalism or reporting and more a simple medium to solicit advertising revenue from a particular demographic.
Have you ever noticed the similarities in the production of sporting event and business news? A host, a play by play announcer, color commentary, telestrators to explain plays and technical charts, interviews with players, coaches and investors, traders, sideline and trading floor reports. In televising a sports broadcast, it is very much in the moment and very emotional especially if your team is playing and in reporting on the markets, our team, which is our hard-earned wealth is always in the game. A boring sports event will bring in low ratings and low advertising revenue and the same is true in the sporting broadcasts that represent business news.
The primary goal of a news broadcast is to hype your emotions and keep your finger off the channel button on your remote control at that very moment. Our goal is to manage your wealth for years and decades.
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