May 6th, 2014
Sungarden Investment Research Article of the Week
by Rob Isbitts, Sungard Investment Research
For those of us who remember far enough back to when the prominent TV programs covering financial markets were on PBS, not cable television, the playing field has certainly changed, hasn’t it?
What once was a way to bring the relevant investment news of the day to life for 30-60 minutes in a highly professional fashion, has evolved. It is now part financial information, part speculation, part infotainment and at times seems more like a sporting event or casino game. This is often overwhelming for those trying to navigate the investment markets as part of their retirement plan.
Whether you are new to the retirement investing mindset, you go back to the days of Rukeyser and Kangas, or are somewhere in between, here is my list of things you will often see when watching financial TV…and how to separate the reality from the hype and sales pitch.
- The typical question asked of professional money managers: “are you in the market or out of the market” or “are you buying or selling today?” Investment managers are often portrayed as skittish stock junkies whose opinions change by the minute. This is just not the case for many. Traders do that, speculators do that, investors don’t. Sungarden’s answer to the in or out dilemma is to pair our favorite investments with one or more other investments that serve as a “hedge” or volatility-management mechanism. In other words, rather than being 100% invested or 0% invested, we can be somewhere in between, without a lot of cash lying around earning zero return.
- Perma Bulls- that is, commentators who take any situation and find a reason to tell you to be fully invested in the stock market and if something bad happens, “don’t worry it always comes back.” My issue with this: that comeback can last you a decade or two if you are not careful and trust the Perma Bulls. My suggestion: plan and invest, don’t just pray for good things to happen.
- “Today is a critical day” – you can just picture all of the macho stockbrokers with the suspenders, expensive watches and slick hair calling you with urgency, can’t you? Breaking news used to be meaningful. Now it feels like the program director is Chicken Little. Countdowns to the economic data releases by the government, many of which are non-events for viewers, are often hyped in this manner.
- The “on the brink” phenomenon – this is an extension of number 3 above. It seems that we are always on the brink of something. It is as if Chicken Little has hired two assistants…Thelma and Louise. Now, those two were on the brink for the entire movie, and in the end, they went over the brink and a big cliff too (oops, should have warned you about the spoiler alert…would have been “breaking news” for sure).
- Way too much coverage of growth darlings or hot stocks. You know the names, even if you are just a casual financial TV viewer. Is it my imagination, or are social media and automobiles the only industries left in the world? Sometimes, it seems like that if you watch financial television.
We have a rule at Sungarden: the more a stock is mentioned on TV, the less attractive it is to us. This has served us well in following our #1 investment rule: avoid the big loss.
Remember that as well-intentioned as financial TV may often be, they ultimately are paid based not on how well you do, but how much advertising dollars they can attract. Their job is to keep you glued to the flat screen. Understand this and you will have a much more informed approach to what you watch, even if you are not an experienced investor.