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You and the Financial Media

In our last post > in which we celebrated Dr. Eugene Fama’s Nobel prize, we described how we relish our role of helping investors arrive at a disciplined strategy to carry them through toward their personal goals … come what may. As “come what may” unfolds, it is the duty and privilege of the financial media to report on it, and we would not want to be without that. But in a world of sources ranging from reliable to raving, how do you know which financial news warrants your attention, and which does not?

Thinly Veiled Infomercials

In newspapers and magazines, you’ll sometimes see “news” that appears as legitimate coverage of a financial seminar, solution or product. A second look reveals the critical, small-type disclaimer at the top or bottom: “Advertisement.” Unfortunately, not every poser is as obvious. It can be hard to differentiate reputable sources from those who may be driven by conflicting agendas that aren’t in your best interests.

One way to assess the reliability of a news source is to dig a little deeper. For starters, try Googling the author’s name and seeing what comes up. It’s usually easy to learn more. In fact, if it is hard, that in itself is a sign that something may be amiss.

Look for credentials, motives and levels of disclosure. For example, do the author and the sources he or she is citing have sufficient related experience to be considered voices of authority? Beware of false credentials that may look impressive but lack any significant hurdle to earning them. Our favorite example on this is Max Tailwager, a would-be financial advisor honoree – when he’s not serving as financial blogger Allan Roth’s beloved pet dachshund.

No matter how convincing the coverage may seem, credibility levels can range anywhere along this scale:

  • Rigorously peer-reviewed academic findings
  • Hard news and unbiased reporting, citing reputable sources from both sides of the fence
  • An opinion or editorial (“op-ed”) supported by objective, reasoned research and sources
  • An unsubstantiated viewpoint based on emotion and/or an underlying profit motive
  • Lies and/or libel

Sensational Sources and Dour Doomsdayers

Of course there is a never-ending glut of news, and even glancing through a day’s headlines can leave one feeling dizzy or dismayed. To quote Dimensional Fund Advisors’ Jim Parker, “The job of media and market analysts frequently boils down to creating plausible narratives around disconnected events so that it all appears seamless. The next day, you start all over again.”

Some of the glut borders on irresponsible nonsense. To reference the aforementioned Mr. Tailwager (as shared by his human aide Allan Roth): “Mad Money’s Jim Cramer puts [Max] to sleep, except when Cramer makes that bell sound effect and then Max starts barking at the imaginary visitors at our front door.”

Here’s another recent take from columnist Paul Farrell, declaring that 2014 is going to be the market’s “ Year of the Boom!” I suppose it’s harmless enough as pure entertainment, but it’s dangerous stuff for investors who may put their life savings in harm’s way by basing their portfolio management decisions on such foamy “news.”

Not all misbegotten news is as egregious. Some of it can generate legitimate reflection on life. For example, I recently lingered over this Bloomberg article, which described a 77-year-old former marketing executive who has found himself flipping burgers to help fund his ongoing living expenses. He seems to be making the cheerful best of his hard times, but it pains me to think of the investment opportunities he lost along the way that would probably have left his septuagenarian activities a matter of choice rather than necessity. And while the article seems accurate, it offers no insights on how to avoid a similar plight. As such, it warrants additional, informed follow-up before acting on any conclusions you might reach by reading it.

Narrowing Down the Informational Overload

The antidote to informational overload isn’t to tune out all media, but rather to reserve substantive reading for your main course, with modest side orders of the less nutritious fare. For your daily reading, responsible columnists such as the Jason Zweig of The Wall Street JournalDan Solin of the Huffington Post and Larry Swedroe of CBS Moneywatch come to mind, to name just a few.

I also would be remiss if I didn’t mention my own posts in the context of this assessment. Clearly, I’m not a hard-hitting journalist … and I have an agenda. Gaining and retaining investor clients for my firm is admittedly at least an indirect part of the plan. But my chief goal with this blog is to do my small part to refute the never-ending stream of “news pollution” on all fronts. I want to help inspire those who read my posts to enjoy a more sane and satisfying investment experience as they pursue their life’s goals – whether on their own or with the assistance of a professional advisor.

I must confess that I took the time the other day to read another bit of alarming news, in which Bloomberg editors observed that earth-destroying asteroids are far more common than you might think, although plausible options exist to defend against them. The article wrapped with what I felt was an apt description of my goal as an investment advisor: “In a cosmos roiling with hazardous and unpredictable threats, preparation is the best defense we have.”

If my blog posts help you think about and act on sensible preparation for building and sustaining your personal wealth in a tumultuous financial universe, then I feel I’ve done my bit to help … at least as long as the planet keeps turning.