A challenge for investors is separating potentially market changing news from the “noise” generated by twenty-four hour trading and the voracious and sensationalist media cycle. Much of the “information” spewed at investors is not only unhelpful, it can be damaging. Wise investors take arms against a sea of media troubles.
Some of the ways the news cycle can hurt investors:
Sometimes, the news is just wrong
A recent example was the description of the situation at global commodity house Glencore. A theoretical view that if current commodity prices were maintained in perpetuity, Glencore could face funding issues over the long term somehow became “Glencore is going broke”. In a perfect illustration of hyperbolic excess, a number of outlets ran with “the commodity markets Lehman Brothers moment”.
Anyone making that comparison with a straight face displayed gross ignorance. Glencore’s balance sheet and funding facilities are public knowledge. A bare minimum of journalistic digging could have turned up the facts in minutes. Yet, somehow, a number of news outlets got this story completely wrong. This is not a trivial matter, and investors who sold out of commodity stocks on this “news” might feel rightfully aggrieved.
The news can be irrelevant because the focus is wrong
The reporting of recent company reports throws up many examples. The key facts around Channel Ten’s result were the rights issue, the American deal and the Foxtel tie up,as well as the underlying earnings and revenue trends.
For the rest of this column, click here: http://switzer.com.au/the-experts/michael-mccarthy/news-versus-noise/