Don’t Believe Everything You Read

August 29, 2017

The media—print, television, and the Internet—are the main sources of information for the average investor. And most of us are constantly checking the news to see what’s going on in the world. All of these sources have become intertwined with our daily lives, and we (mostly) trust the information they provide us is accurate and trustworthy. We have a tendency to assume that we’re getting all the relevant information we need from these sources, and we can use that information to form opinions about politics, what the weather is going to be like tomorrow, and how we should invest. It would be easy to debate whether this source or that source has a political agenda or a liberal or conservative bias. Instead, we want to address a broader issue: the importance of considering the source.

Media companies are businesses. Their job is to make money, just like most other businesses. Their best source of profit is advertising. The larger the audience, the more advertising dollars they can command. A media company’s logical strategy, therefore, is to reach and retain as many sets of eyeballs as it can. There are lots of ways to do this, but the biggest one for investment-oriented sources is by creating a sense of urgency.

We’re not saying the media deliberately lies (although in the rush to be the first to break a story, they are often wrong and provide incomplete or unintentionally misleading analysis), but we are saying that you often don’t receive complete and objective information from the popular financial media.

Not all sources of information have spin. Many are responsible about their research and how they present their points (The Economist is one of our favorites). We read much of the same print media as everyone else does (The Wall Street Journal, the New York TimesBloomberg Businessweek, among others), with a careful awareness of the issues we mentioned above. But when it comes to high-quality analysis, we tend to go to research-oriented firms whose businesses usually depend on their reputation for careful, objective analysis, rather than advertising revenues. (The Bank Credit Analyst is an outstanding source for macro-level analysis, some of which they provide free to readers of their website and their Twitter followers.) We also like to hear opinions from some of the fund companies we know well, though we’re aware that many managers seem hardwired to favor their own asset class. People like Dan Fuss from Loomis Sayles, David Herro from Harris Associates, Jeffrey Gundlach from DoubleLine Capital, Howard Marks from Oaktree Capital, and Jeremy Grantham from GMO are a few of the many investment professionals we like to talk to and whose work we regularly read.

We get data from many different sources; this enables us to cross reference and carefully evaluate the validity of what we hear and see going on in the investment and economic worlds. Discerning between what’s accurate and (relatively) objective versus what’s mere noise, or potentially more worrisome, spin, is a vital aspect of how we vet both managers and investment ideas. It’s also something we take seriously in our roles as financial advisors. Staying on top of developments that matter and connecting the dots so that we can give clients an honest and independent view are essential to living up to Litman Gregory’s core values of integrity, expertise, and excellence.

If you have questions please call your Litman Gregory Wealth Advisor or contact us here.

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