Bob CollinsFaced with an overwhelming assault by news organization headlines warning of the market catastrophe that lay minutes ahead, there was a moment this morning that I almost cashed out all of my retirement portfolio that’s in equity markets and joined who knows how many others on the sideline.
This goes against everything I’ve learned firsthand in 40 year of working for a living, but in the absence of even a decent nugget of information telling me what I should do, I felt no choice but to give in to the gloom. Only laziness prevented me from acting, but I wonder how many millions of Americans, more energetic than I, are reacting to the steady drumbeat of news organizations in addition to whatever market savvy they have?
So it was interesting to hear a caller on Midmorning today who insisted the media isn’t, as alleged, “making things worse.”
“I absolutely think that’s true,” Ross Levine, a financial planner said in response. “If you look at what’s really going on as far as how companies are reporting their earnings, and if you look at the fact the dividend yield in the S&P is close to what 10-year Treasuries are paying, it’s almost obscene that the markets are continuing to sell off at this level, and I think market short-term is very emotional. Market short term look like the weather forecasts; you have no idea what they’re going to do in the short term. But long term, we have a pretty good sense of market valuation and that’s going to be based on earnings, and it’s going to be based on dividends, and it’s going to be based on getting the economy going again.”
“There’s been a theme throughout this thing of ‘shoot the messenger,’ said Heidi Moore, the New York bureau chief for American Public Media’s Marketplace program. “You see it with S&P and you see it with journalism. What we’re trying to do here is inform people for the most part about what’s going on. If those people are telling us that they’re expecting a crisis, that they’re expecting a panic, that they’re expecting the Apocalypse, then of course we’re going to reflect that. And when those people don’t say that, we reflect that as well. It’s important to note that it’s not the press creating this; the press and S&P did not spend us into a $14 trillion deficit. So we have to kind of focus here on the issues, and I think people put way too much emphasis on what words are used, and they read stories to see which political parties they support. It’s not really about that; it’s about are we keeping you informed enough so you can do your duty as a citizen? And that means you have to read the financial news and be able to filter that.”
“Words are important,” Levine countered. “If you take two situations and you look at the stock market and you say, ‘stocks are having a major sell-off,’ or ‘stocks are trading at the lowest valuations we’ve seen in three years,’ people will interpret that differently. I think that the words shape the context of the story. I’m not saying it’s the press’ fault because the press is reporting and I think they’re doing a good job… but I do think words matter and the interpretations of those words matter even more.”
Ms. Moore acknowledged the market is emotional and a reflection of the psychology in it. “I do think the words matter, but for daily market movements, that doesn’t tell us so much about what’s going on in the economy.”
And it doesn’t tell me what I’m supposed to do about any of this.
