Fisher Investments Editorial Staff
Media Hype/Myths

Mutterings and Musings on Media

By, 10/12/2011

As MarketMinder readers probably know, we are heavy and frequent consumers of media. And in the process, we come across a great deal of truth and fiction, underreporting and hyperbole. There’s good and bad in media to be sure, and it’s often left to the reader to dissect what’s presented. Here are a few points to consider in assessing current coverage.

Honesty in stock market journalism

When reading a typical stock-market story, one that says something like, “Futures Gain Ahead of Obama Jobs Plan,” did you ever think to yourself: “How do we really know the market move had anything to do with the president’s jobs plan? Says who?

Says me. I’m a markets reporter. It’s what I do.

--Chao Deng, Columbia Journalism Review.

That may sound like a great deal of hubris, but Ms. Deng’s quote should actually be a solid reminder: What the media says about market movement is not gospel. It is not the ironclad truth. It is a report of what the market did and an attempt to explain why. That attempt may be close to accurate. Or not.

Fact is, in a world where millions of people invest—each for their own reasons, motivations and based on their own theories and conclusions—there normally isn’t one simple headline-begets-movement equation. And it isn’t realistic to think one reporter can conjure up a reliable rationale repeatedly given the inundation of global economic data flooding newswires each week. Simply, readers have to be skeptical of theories stating story X caused market movement Y.

Nor is it tremendously fruitful to constantly search for a direct cause for daily movement, which is the challenge of being a markets reporter: You have to hold the public’s interest, or they won’t read. So drama and adjectives can be ratcheted up, the cause simplified and skepticism about conclusions drawn…well, that can be ratcheted down.

The grand irony of all this is the more significant and meaningful market moves tend to hinge on stories the reporters didn’t broadly cover—like the implementation of FAS 157 in 2007. And thus the dichotomy of media: The coverage they provide serves the valuable role of enhancing our national discourse and mitigating the surprise power of a news story. But all the while, the skeptics within some introspective market reporters are questioning the usefulness of what’s written.

Is it different this time?

If there’s one thing the media’s consistent about lately, it’s the use of, “it’s different this time.” No matter what the “it” is—unemployment’s persistently and frustratingly high readings, too-slow economic growth, the level of political gridlock and divisiveness—the media’s likely got a story for how this time’s historically unprecedented.

Now, interestingly, many of these claims also immediately invoke a comparison—like, “It’s different this time: It hasn’t been this bad since 2008’s financial crisis!” or “It’s different this time—we’re actually headed for a lost decade like Japan!”—which by definition invalidates the “it’s different” argument.

We appreciate the need for the media to draw in readers and turn often complicated topics into concise analysis and sound bytes—that’s the nature of modern media. And media outlets are like any other business—they want to do what it takes to be as profitable as they can. And media is useful! But if they can’t sell a headline, they won’t get readers, and their business goes kaput. So good investors should learn to look past what can be, ahem, at times sensationalist headlines to glean what’s useful.

We won’t take time here to refute every claim of “it’s different this time”—there are too many to counteract in a readable piece. But suffice it to say, this time (whatever “time” you’re referring to) isn’t, in its basics, much different from what can be observed multiple times through history. Politics are as divisive as ever. Unemployment has historically lagged recovery—by a lot. Economic growth hasn’t ever grown in a straight line. You name it, we bet we can find at least a few similar historical instances. (Oh, and “it’s different this time” headlines? They’ve happened before, too.)

Occupying media headlines

Whether you sympathize with the Occupy Wall Street protesters or not, or agree with their (myriad, evolving and often conflicting) list of (editable) demands or not, or wonder whether they realize they’re advocating for a flat tax or believe the corporation-free utopia they yearn for already exists doesn’t much matter—not for capital markets. In fact, the media’s hyper-focus here may be a small positive factor.

Whatever you think of the movement, Occupy Wall Street isn’t an economic factor. Sure, many of their demands touch on perceived economic slights. But the impact the protests have is likely to be much more political—if they have an impact at all.

Keep in mind, violent protests flared all over Europe this summer to protest governmental austerity measures. The difference is those protests were (primarily) public workers who didn’t want their pensions impacted—and a fair few disaffected youths. The OWS protests are, in a way, the polar opposite. Our public sector is relatively much smaller than much of Europe—much much smaller than Greece. Congress isn’t debating whether to cut anyone’s 13th month of salary or increase the retirement age (at least, not yet). What (some of) the OWS protesters seem to want is Greek-style employment security that has never existed here—ironic since this very summer disproved the long-term viability of such employment security.

What’s more, despite the often violent protests, ultimately European politicians voted for austerity. Which should be a glimpse into how much impact a less-organized band is likely to have. And as we’ve frequently written, US politicians are less inclined in the third and fourth years of presidential terms to make huge legislative waves. So while plenty of politicians may attempt to make hay with shows of solidarity, our guess is all this sound and fury ultimately signifies nothing.

Ultimately, the recent media attention seems to be a shift from the two issues that have almost exclusively dominated headlines (and contributed to volatility) over the past few months—fears over eurozone debt issues and whether the US is likely to double dip. We welcome more such shifts, even if it means more drum circles.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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