The Tense in Financial Journalism
It has long been our view that investors who rely upon reports and analyses by financial journalists often wind up in a cul-de-sac -- or worse। There are, of course, some prescient financial journalists who are smart, analytical, and independent-minded. Unfortunately, they seem to constitute a distinct minority.
One of the principal problems of financial journalism, as we see it, is the verb "tense।" If you replace the word "will" with the word "has" you will frequently find enlightenment, we think. Many writers seem to take a past trend and project it into the future. This is why at the top of a bull market, we learn that the market "will" rise. What we are actually receiving is an historical narrative (the marked HAS risen -- long enough, and far enough, to finally attract the writer's attention and gain his conversion to the bull point of view). This historical narrative is all-too-often presented in the guise of a future "prediction."
There is nothing sinister in this। It is simply that by the time awareness of a trend makes its way down the analytical food chain to the journalist, it is well-developed. All too often, the trend has already crested and turned down. We have seen this again and again. With regard to residential real estate, for example, all we read about at the top of the market, and even after it had peaked and turned down, was rising house prices, flipping, condo conversions, etc etc, and all the money TO BE MADE thereby (translation: Already HAS been made, NOW about to be LOST).
Another problem appears to be the dependence of many financial writers on their "sources।" These sources may sometimes have their own agenda: such as bulling an asset class in which they have large paper profits, and now wish to unload in anticipation of the end of the bull run. There can be other advantageous uses to which "sources" can put those they may regard as their journalistic "assets."
There is also the self-protective impulse many writers may feel. There is safety in numbers; if they are wrong along with the herd of journalists, no ill will befall them. If they are wrong alone, they are in jeopardy.
As an antidote, when considering journalistic input the investor may find it advantageous to use the "tense substitution" we have alluded to. A more frankly contrarian approach could also be considered: assume that the "trend" glowingly described in the story may be close to the crest, or may have already topped out and begun its southerly move.
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