It is a conspiracy to keep you poor. This conspiracy is probably not intentional, but to keep the presses rolling, to keep you and me with eyes glued to the tube and internet, their product has to be gripping. Fear and sensationalism are the primary tools at their disposal. Ergo, there needs to be a bad-news slant in everything they produce. I get it. I see it in the number of page views my posts receive when my titles are blatantly negative (even when the my conclusions are positive). We are talking about as many as a tenfold increase in hits versus the more neutral titles.
What’s the connection to your pocketbook?
The connection is simple. The continuing cautionary and negative stance taken by the media has kept many of us on the sidelines, out of the market in cash or fixed income securities earning nothing (or next to nothing) during a seven-year period while the S&P 500 more than tripled. During this time stories continued to surface indicating individual investors were coming back to the market (dated 2/20/13–this post is a perfect example). This has not been the case in part because of the media diet they have been fed.
Since the bottom, you have had the mainstream media, print and television (CBS, NBC, ABC, New York Times, etc.) reporting on a frustrating, slow-growth recovery…liberal leaning MSNBC was guilty of the same. There were politicians who, for political advantage, clamored for (and continue to) more jobs (they should have been clamoring for higher paying jobs) as the unemployment rate dropped steadily from 10.5% to 4.6%. Before the 2012 election real estate billionaire Mort Zukerman continuously complained in his numerous appearances on PBS (The Mclaughlin Group) that this was “the worst economy we’ve seen since the Great Depression” — a total, complete exaggeration . The Fox Network never gave its viewers anything but a dark view of the economy and the market. Last, but not least, CNBC never liked or believed in this market from the get-go. My question: did this affect your decision process? It probably did affect many, to their detriment, keeping them from investing or totally out of the market, keeping them poorer. In a larger sense this negative clamor may have slowed economic growth by curbing or discouraging general business capital spending plans.
According to a Gallup poll taken between April 6 and 10 of 2016, Americans who say that they have money invested in stocks totaled 52% of those surveyed. That ownership rate is the lowest number recorded in the 19 year history of this poll. The average over the years has been 62%. The high was 65% in 2007.
It is understandable that after 2008 many would shy away from the market … once burned, twice shy. Many left the market completely after that and never returned. As the market moved off the bottom, (using the S&P 500 as a proxy) more than tripling off the lows, they continued to avoid stocks. The numbers indicate that those who had retained stocks continued to liquidate their positions. I would point out that this is not typical investor behavior at a major market top a la 2007. Before great secular bull markets end everyone has to be back in the water. The 52% Gallup reading would indicate that there are yet many swimmers who haven’t even put a toe in.
What is the takeaway?
What you read in the paper, see on the telly or pick up on the internet cannot be a basis for your investment policy. Realize the negativity is there for a reason and it is not to put money your pocket. It is to put money in their pocket. Bad news sells. If you must consume, do so at your own peril. A little kortsessions.com could serve as a useful antidote.
What’s your prescription?
The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions. These are not meant to be construed as recommendations to BUY or SELL. All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.
Interesting! I have always been very stock heavy compared to expert advice. I thought it was because I am less risk averse than average but never considered this perspective, The nicest I can be is to say i find the current media (in all areas) to be really lame and that may contribute to my willingness to be comfortable with a stock rich investment portfolio.
Comfort in owning equities comes in part from I the realization that you actually own businesses (going concerns — in many cases with decades in their respective businesses) and not lottery tickets. Another element that Adds comfort is understanding and knowing what you own. The final ingredient is diversification to protect you from the times that you will inevitably make a bad choice. Unfortunately in the case of institutional investors they operate under the gun trying for optimum performance in the short term. For them it is hard to make and keep good investments. Unfortunately for many individuals none of the three items mentioned above are part of their investment calculus. Ergo, they have terrible distrust of the stock market until everything is coming up roses … A good way to come up with the short end of the stick.