How to read the news: slow down and take a deep breath – BCA Research
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What do the Greek general elections, the US Supreme Court decision on the Affordable Care Act (ACA or ‘Obamacare’) and the Italian general elections have in common, asks BCA Research.
The press initially misreported all three, causing investors to make split-second decisions with incorrect information.
In Greece, the media initially reported that the left-wing SYRIZA won the election. However, SYRIZA only appeared to be in the lead because the heavily left-wing urban center votes were counted first. As the vote streamed in from other parts of the country, the center-right New Democracy slowly emerged on top.
As the Supreme Court decision on ACA was read, the Drudge Report made an incorrect call that the Court had struck down Obamacare. The analysis was wrong; the Drudge Report simply did not understand the decision.
As we watched the Italian election results, most news outlets confused the regional Senate election results from Lombardi as the results for the entire country. Former PM Silvio Berlusconi was pronounced the winner of the Senate by reporters who likely did not even know where Lombardi is.
More broadly, the media failed. In todays twittersphere universe, journalists have to respond to events within minutes, not days. Often, they are responding to events that they have no experience covering. How many Reuters or CNN journalists remember the last Greek election? Or know to wait for the Italian Senate vote to be announced in full? Or are constitutional law experts?
This inadequacy is not necessarily the medias fault. Journalists are responding to the demand for instant news and to competition from blogs, pseudo-news outlets, and twitter, which are more than willing to provide a fresh view every 10 seconds. I receive at least a dozen emails a month, asking me to interpret analyses of portending doom from obscure sources as if they were the Dead Sea Scrolls.
Ironically, the proliferation of monitoring and global connectivity has made the medias job tougher and its reporting worse. In the past, journalists had the time to work their network, to connect with a source who did know how politics in certain countries worked before they filed their piece for morning publication. Today, because of pressure from non-traditional outlets, they barely have the time to copy/paste the report from a wire service before someone with a twitter account beats them to it.
Mitt Romneys campaign adviser, Stuart Stevens, recently gave an interview in which he made several revealing comments. The first was that because of the prevalence of twitter-speed reporting, journalists are under pressure to constantly report on stories, even when there are none to report. The second point was that news is whatever people decide news is.
The medias objective is to have its readers gasp. However, good investment decisions are not made while holding ones breath. My advice to investors trying to weather this environment is to slow down and stay on the sidelines until the fog of uncertainty dissipates. Sure, some potential returns will be missed, but in the long term, more calls that end up being correct will be made (and less ulcer medication consumed).