No, this is not a political blog. This is three decades of blood-and-sweat soaked lessons gleaned from investing and following the media. Like condensed milk, it's all boiled down to the five essential "must knows" for you. These are the five Frankensteins that will kill your investing profits unless you keep your eyes wide open.
My three decades of experiences trading and investing have proven to me time and time again that profits play on a loop. Profits are the result of consistent and rational decisions. Good decisions come from clarity. Supreme clarity is based on truths. This blog is about achieving this golden loop. Before you can learn to avoid these five Frankensteins, you must understand the five monsters of the media.
1. Filtered Truth
Beware of the triplets! By the time reality is filtered through the eyes of individual journalists, their editors and a corporate media's strategic agenda, it's virtually impossible for the truth to emerge unscathed. It's widely known that certain newspapers and broadcast media invariably spin a story in a predictable manner. You may try to pick your media carefully but regardless, the best you can expect is what I'd label "TRUTH-LITE".
2. Shock & Surprise
The media is clearly biased and will always report stories about the unexpected. They are in the entertainment industry, after-all. Important truths that aren't deemed exciting are dismissed. Unusual events are sensationalized. If Corporation XYZ achieves another stellar quarter of 20% growth, raised its dividend and added 5,000 new jobs, that routine good news will get overlooked in place of a sex scandal or bankruptcy at Corporation ABC. Reporting is not balanced. For this reason, you must have a dashboard of routines to search for the appropriate news that you need to monitor. As an example, consider the daily drumbeat of Covid-19 reporting today. Are you hearing about the colleges that are successfully returning students to campus? Hardly. But you are hearing plenty about wild Frat Row parties and the near-death infection spikes at a handful of colleges. Shock and surprise sells.
3. A Puzzle With Missing Pieces
Ever try to assemble a used jigsaw puzzle? Inevitably, there are essential pieces missing. I find it maddening. As investors, we strive for a complete puzzle picture with all the financial tradeoffs delineated so we can rationally assess the risks and rewards of a particular equity or fund. The media often makes this beyond difficult as they selectively overlook and omit relevant facts, thereby presenting an incomplete distorted picture. This negates the possibility of a clear and accurate vision pertaining to a particular investment. We investors have a uneasy relationship with the media. We need their news to make risk and reward decisions, but their distortions make it more challenging than necessary.
4. Unnamed "Reliable" Sources
This one is my hot button. How many times have you read or heard stories based on a single anonymous but supposedly reliable source speaking off the record? This is a non-random sample of one, but journalists take it as gospel. This is statistically naive and unforgivable in my estimation. Start noticing how often there is no second source in many reports. Layer on top of this what I've witnessed many times — a business executive or financial manager feeding self-serving disinformation to a young reporter who in turn presents the information as if it's the word of God. I have deep reservations about small sample sizes, uncorroborated statements and intentional self-serving disinformation by those who'll profit the most. And in the financial arena, the consequences of this disinformation can move vast amounts of assets, producing significant winners and losers. This is another reason I have embraced my stock charts for so many years. To me, a chart represents a picture of how thousands of buyers and sellers are voting with their real money on a particular day in the auction of an equity. It's statistically significant, seldom gets re-stated, and yields an authentic full-frame snapshot of all known and unknown information regarding that equity.
5. Eyeballs, Ads & Profits
Lastly, I'm sorry to break it to you but your financial well-being and success doesn't rank in the top 100 objectives for these purveyors of news. Their objectives and mission statements are centered around an unholy trinity — (a) maximize audience eyeballs, (b) maximize ads and (c) maximize profits. For these explicit reasons, I urge you to be a very careful and selective consumer of their handiwork. A personal investment toolbox based largely on news will yield notoriously wild results.
And So, In Conclusion...
As a successful investor, you must have a personal dashboard with which you filter your investing decisions. One that allows you to drive in a consistent manner, replicating your successes and avoiding the potholes of past failures. If the news media is providing you that toolbox, you will be prone to make irrational financial decisions based on their filtered truths, cherry-picked sensationalized stories, and incomplete information with key pieces missing due to uncorroborated or anonymous sources.
You can raise your IQ by 40 points by not letting yourself slip into forgetting any of these five media monsters. And for these reasons, I remain unapologetic about my chart-centric investing methodology. I've learned to believe my eyes. My charts have never betrayed me or lied to me, but instead have protected me from an aggressive world of media disinformation, deception and Trojan horses.
As I said in my introduction, it's my experience that:
- Truth leads to clarity
- Clarity leads to rational decisions
- Rational decisions lead to consistent profits
Within my charts live the truths that have produced my profits for decades. Join me! Defend yourself and your portfolio. Let's crush and defeat disinformation. Don't be timid. Be a warrior for truth. I challenge you to uncouple yourself from the media for one season. Believe in yourself. Believe in your charts and restore truth and reality to your investing efforts. I wager you that it'll be your season of profits. Period. End of story.
Trade well; trade with discipline!
- Gatis Roze, MBA, CMT
- Author, "Tensile Trading: The 10 Essential Stages of Stock Market Mastery" (Wiley, 2016)
- Presenter of the best-selling "Tensile Trading" DVD seminar
- Presenter of the "How to Master Your Asset Allocation Profile DVD" seminar
- Developer of the Tensile Trading ChartPack for StockCharts members