The amount of financial news published these days is staggering. The volume of news and analysis could drop 90% and it would still be completely overwhelming.
How do you make use of it all? As a financial writer who spends an embarrassing amount of time sifting through news, here are a few things I've come to terms with.
Read things you know you're going to disagree with
There is so much media content today that you can always find someone who agrees with you. Bullish on Apple (NASDAQ: AAPL ) ? Thousands of writers are, too. Think the government is a giant conspiracy? There are countless blogs for that. Think the global recession was caused by celestial bodies falling out of alignment? I'm not kidding, folks-- there are blogs for that (and I'm doing you a favor by not linking to them).
The huge diversity of opinions makes readers vulnerable to something called confirmation bias. It's when you start with an answer, and then dig for information that backs it up. It's really dangerous because once you find someone else who agrees with you, you become more convinced that you are right -- even though you can find someone who agrees with you about literally anything.
In investing, Berkshire Hathaway (NYSE: BRK-B ) Vice Chairman Charlie Munger advocates the intellectual approach of Charles Darwin, who regularly tried to disprove his own theories. I'd recommend doing the same with financial news. You will probably learn the most from people you disagree with. They cause you to challenge your existing beliefs, many of which may be driven more by emotion than by fact.
You don't have to get crazy with this. But whenever you're convinced of a trend or a theory, go out of your way to read the counterargument. At worst, you continue to disagree with it. At best -- and quite frequently -- you gain a perspective you'd never thought of before.
Read old news
As Black Swan author Nassim Taleb writes, "To be completely cured of newspapers, spend a year reading the previous week's newspapers."
It is treated as a given that old news loses value. I disagree. Reading old news can provide far more insight than current news.
Consider this, from a December 2008 Wall Street Journal article:
Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar. Around the end of June 2010, or early July, he says, the U.S. will break into six pieces -- with Alaska reverting to Russian control ...
California will form the nucleus of what he calls "The Californian Republic," and will be part of China or under Chinese influence. Texas will be the heart of "The Texas Republic," a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an "Atlantic America" that may join the European Union.
The value in these prediction-type articles -- which make up a big portion of financial news -- comes months or years after they are published, when you can see how hopelessly inaccurate they were.
Or take this headline, from August 2011: "Dow falls 512 in steepest decline since '08 crisis."
That wasn't a bad prediction, of course. It's what actually happened, and it felt like a big deal at the time. But 14 months later, how many people still care about it? No one. The Dow Jones (DJINDICES: ^DJI ) has regained all of its losses and then some. What seemed monumental then is irrelevant now. You only gain that perspective in hindsight.
These are both extreme examples. But read enough old news, and you quickly realize two things: The majority of predictions never come close to being true, and most of what we think is important news is trivial in the long run. Once you become convinced of this, you react differently to today's newspaper.
Read a mix of professional and amateur content
Professional journalists -- those at The Wall Street Journal, New York Times, Financial Times, and so on -- will always be more factually accurate, have better access to reputable sources, and can dig deeper into a subject than most amateur bloggers.
But they also have deadlines, quotas, and bosses with quarterly earnings to worry about. That makes them susceptible to turning non-news into something meant to sound important. The best examples are journalists ascribing reason to daily market moves. "Dow Falls on Profit-Taking," for instance. No one knows what that means.
On the other hand, amateur bloggers tend to write only when they have something meaningful to say (though there are exceptions). When stumped, they just don't publish anything. Sometimes for days on end. It's no big deal. They only answer to readers, who demand quality and nothing else.
Ideally, you should read a healthy mix of both. Never one or the other.
Don't think every news story is actionable
This might be the most important. There are thousands of news articles published every day. Very, very few of them should ever compel you into action.
Quarterly earnings news stories rarely provide anything substantive enough to cause you to buy or sell. Same for industry trade news, analyst upgrades and downgrades, and -- especially -- economic reports.
Most financial news should, at best, be treated as something that incrementally helps you understand the big picture. If you find yourself tempted to tweak your portfolio after reading news, do your future self a favor and read less of it.
The good reads
Opinions vary, but here's a short list of my favorite financial writers and websites (besides, of course, Fool.com).
- Any half-serious investor should have a Wall Street Journal subscription. It's $15 a month and covers 90% of relevant financial news.
- Real Clear Markets, Counterparties, and Abnormal Returns are the best news aggregators.
- For economic data, no one comes close to the blog Calculated Risk.
- Eddy Elfenbein, Josh Brown, Barry Ritholtz, and FT Alphaville consistently provide the best market-related content.
- Read James Surowiecki of the New Yorker's columns every month. Twice.
- Derek Thompson of The Atlantic consistently writes thought-provoking pieces.
- Jonathan Weil of Bloomberg digs deeper than 99% of his journalist peers.
- Carl Richards of The New York Times is one of the best personal-finance writers in history. No exaggeration.
- Robert Johnson of Morningstar writes a good weekly piece on the economy. They're well written and data-driven.
- Take 30 minutes every weekend to read The Economist (bonus tip: narrate it in your head with a British accent and you'll feel smarter).
Read on!
Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.
Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Follow him on Twitter, @TMFHousel. The Motley Fool owns shares of Apple and Berkshire Hathaway. Motley Fool newsletter services recommend Apple and Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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Report this Comment On November 20, 2012, at 11:15 AM, Tomohawk52 wrote:
"Read things you know you're going to disagree with
There is so much media content today that you can always find someone who agrees with you. "
That's why I read you, Mr. Housel. ;-)
Report this Comment On November 20, 2012, at 11:16 AM, DS31 wrote:
Glad I could be first to comment. This is a tremendous perspective (though am I succumbing to confirmation bias because I already agreed with this???). Your first point, as Munger often says, "invert everything," bears repeating! Trying to disprove your own views has to be one of the most beneficial practices ever for continual growth and improvement. And thanks also, Morgan, for your clearinghouse list of resources. I'll check them out.
Dan
Report this Comment On November 20, 2012, at 11:17 AM, DS31 wrote:
uggg...tomohawk52 posted while i was typing!
Dan
Report this Comment On November 20, 2012, at 11:29 AM, Binjiling wrote:
Always appreciate "News you can use". This was another great Morgan Housel piece. Thanks and keep on cranking out your thoughts!
Report this Comment On November 20, 2012, at 12:30 PM, fool3090 wrote:
Isn't it interesting that the best sources for financial news are print or online? Not a broadcaster in the bunch -- they're just noise and/or entertainment. (CNBC, Fox Biz, CNN... a pox on them all.) And I agree in reading something you don't agree with. If your thesis can withstand a challenge, it makes your thesis all the more stronger. I wish this "seek out contrary ideas and opinions" approach could be taken by poltical leaders and not just us puny little retail investors.
Report this Comment On November 20, 2012, at 4:58 PM, stockdissector wrote:
Interesting contrarian viewpoint on research. Getting too comfortable with a concept can be dangerous. It can cause apathy when action is warranted and jumping the gun when you should lie still.
Report this Comment On November 20, 2012, at 6:40 PM, haywool wrote:
Hey Morgan !
Good article, as usual. In the "Good Reads" section, you didn't mention John Mauldin and his "Outside the Box" articles ... good thing ! I think he's interesting but it's mostly just advertising his wares. Like you inferred, we must be selective to some point.
Thsanx,
Rich
Report this Comment On November 20, 2012, at 6:57 PM, veritasvincit wrote:
Morgan,
Just so you know, I've asked for an e-reader device for Christmas, specifically because I want to read "Everybody Believes It....." Never wanted one until your book.
Your comments, such as those above and many others, are sent to my good friends and family, as they see most news items as actionable. I feel like they open the door to the closet and see the Bogeyman. They scream, and close the door. The next day, they open the door again and scream...but it's only the same Bogeyman that's been there all along.
Can you find how many times the term "Stocks fall on concerns about the European debt crisis" has been used in various media during the past 3 years? Just wondered....
Also, I do read James Surowiecki....and I believe his column is published very week, rather than once per month.
Thanks for every one of your articles. Have a good holiday.
Veritas
(Disclosure - long USA)
Report this Comment On November 20, 2012, at 7:01 PM, TMFMorgan wrote:
^ send me your email and I'll send you a text copy. no need to buy an e-reader.
Report this Comment On November 20, 2012, at 8:39 PM, kevcl747 wrote:
Interesting article ! I was listening to Kyle Bass the other day on Bloomberg and I thought he made a lot of sense. One thing he said is that this may be one of the most difficult times in history to make investment decisions. I tend to agree with that and also his conclusion that the number 1 priority now is preservation of capital. In fact he confirmed my outlook at this time and so far no one has been able to counter that view in my opinion. I could guess where tax rates are going but I am not even going to try at this point. I need a clearer picture to make any decisions. I look at things like a lot of CFOs these days. It all boils down to maximizing return, minimizing risk and minimizing dilution.
Report this Comment On November 20, 2012, at 8:46 PM, TMFTheDoctor wrote:
"Take 30 minutes every weekend to read The Economist (bonus tip: narrate it in your head with a British accent and you'll feel smarter)."
If you get the digital subscription, you can download the (seven or eight hour) audio version, which is in fact narrated by stuffy-sounding British people. After awhile the voices get stuck in your head and you read everything in their voices.
Or maybe I'm just going crazy.
Report this Comment On November 20, 2012, at 8:47 PM, TMFTheDoctor wrote:
@veritasvincit: FYI you can download a Kindle program for your PC or even read Kindle books in-browser
Report this Comment On November 20, 2012, at 9:25 PM, xetn wrote:
The Keynesian solution is to consume your way to wealth. Consumption is everything.
But you cannot consume until you have produced. Here is the problem:
http://goldnews.bullionvault.com/files/20121116-marc-faber.p...
Report this Comment On November 20, 2012, at 10:03 PM, jpparnell wrote:
Amazon has a free download of Kindle for your PC.
"Everybody Believes It" is only 0.99.
http://www.amazon.com/gp/feature.html/ref=kcp_pc_mkt_lnd?doc...
Report this Comment On November 20, 2012, at 10:10 PM, jpparnell wrote:
Well, that was my first comment ever on Motley Fool and I managed to get trumped by a "going crazy" Doctor. :D
Excellent article Mr. Housel!
Report this Comment On November 20, 2012, at 10:35 PM, 2beewise wrote:
I read anything with "Morgan Housel" in the by-line.
Perhaps I'm a victim too. <;-) But a happy one!!
Morgan, I always appreciate your mix of common sense and intellect.
Thanks,
Paul
Report this Comment On November 21, 2012, at 10:11 AM, bbaruchsc wrote:
what subscription to the wsj do u have? i just received my renewal - 2yrs ~ $750
Report this Comment On November 21, 2012, at 10:13 AM, TMFMorgan wrote:
^ Mine is month-to-month, online only.
Report this Comment On November 21, 2012, at 11:49 AM, jgunnar wrote:
Good list, two to add
1. Jason Zweig (covered under WSJ but worth mentioning again and reading his Total Return blog)
2. Caroline Baum (Bloomberg)
Report this Comment On November 21, 2012, at 11:51 AM, 48ozhalfgallons wrote:
I'm always a bit late to this forum. I gotta hand it to you, Mr. Housel, your articles are entertaining and I do enjoy the tug. My biggest chuckle though came the moment I arrived at the comment of Tomohawk52 as my inner voice while reading this article was chanting exactly his thoughts.
I might add, the delightful thing about the Brits regarding the Economist is their use of puns. I miss William Buckley's American challenge in that arena.
Report this Comment On November 21, 2012, at 3:53 PM, JadedFoolalex wrote:
" "Dow Falls on Profit-Taking," for instance. No one knows what that means."
Really??? I would have thought that "profit-taking" was self explanatory!
Who knew? ;)
Report this Comment On November 21, 2012, at 3:56 PM, TMFMorgan wrote:
^ Try to explain "profit-taking" and I'll show you what I mean.
Report this Comment On November 21, 2012, at 6:41 PM, suntzu777 wrote:
Thanks, if you work 8 hours a day and have say only one hour to ninety minutes a day to read, Which of your suggestions would you make the priority ?
Report this Comment On November 21, 2012, at 7:08 PM, learningfool1873 wrote:
I agree with not acting on everything you read as becoming true just cuz someone wrote it. It brought to mind when I first started trying to learn about investing.
I had stumbled on an inexpensive newsletter (you get what you pay for, anyone?) that I started using for investment ideas. I (thankfully!) tried to learn something about the recomendations, instead of blindly buying them cuz I felt I didn't know anything yet. As I read, there were VERY few recomendations I felt comfortable with, until, one day, I read his forecast of a financial meltdown that America would not survive. He recomended SELLING ALL U.S. stocks & buying only non-U.S. stocks. I thought about that for a minute, & came to the conclusion that if, indeed, everyone DID follow his advise, America would truely have a meltdown.
I decided that sounded like stupid advise, did not follow it, & dropped his newsletter! True, America had a lot of trouble, but where would a portfolio be NOW with no U. S. stocks???
I looked around & found The Motley Fool & have stayed with you ever since. I've LEARNED so much in the past several years, but it's scary to think of what I not only don't know, but what I don't know that I don't know! I DO know I did not agree with his "timing" the market!
My worst investment came when I jumped at a piece of mail & did not do due dilagence. I didn't have a lot invested, but I lost almost all of it. It taught me, however, not to jump without at least looking for a safe landing. Hence, I have many small positions in many (hopefully!) good businesses, which I intend to stick with for the long run (unless there seems to be a really good reason to rethink my position.
My 1st investment was in Siemens cuz I knew about their switches from work, but I was looking for an investment in hearing aids, as it seemed to me that a lot of kids had different sound devises turned up full-blast! EAR was going nowhere & hadn't for a long time. Looking for others in the field, I found Siemens & decided to go with what I knew (& hearing aids were a small portion of their products).
One of my best was Chipotle at $58.75, which I still have. Most of the time, I have more winners than losers, & most of the losers are down less than the winners are up, so I figure I'm not doing too badly.
Anyway, I try to decide if the company is a good fit for me, & then what I'm willing to risk. I've found that I have a higher tolerance of ups & downs that I originally thought. I don't LIKE when my stocks are down (unless I decide to add another position), but I don't jump into selling without some thought.
I'd like to thank The Motley Fool people for my on-going education. I learn so much when I check out their sites. I have also gotten several others to sign up & LEARN!
Please keep up the great work!
Report this Comment On November 21, 2012, at 11:49 PM, benthalus wrote:
This is your best article yet. Sharing new sources of perspectives is always welcome. I especially like James Surowiecki, and his book The Wisdom of Crowds is fascinating.
Report this Comment On November 22, 2012, at 11:43 AM, jerryguru69 wrote:
"amateur bloggers tend to write only when they have something meaningful to say...they just don't publish anything. Sometimes for days on end."
Sorry 'bout that. But it does give me an excuse to tell one of my favorite stories.
I am middle-aged with the proverbial beer-belly. There is not much I remember from my junior high school days, but this one is key to my current rhetorical behavior. My registration was messed up, and the principal, who was one of those burly marine types with a crew cut who you did not mess with, spent half an hour with the school secretary to fix it. Sitting in his office, I saw a poster that said "make sure your mind is in gear before you open your mouth".
To this day, this is advice I still live by, including my rather one-sided (in the negative sense) run for Congress a few years ago.
To put it another way, take everything you hear with a grain of salt.
Report this Comment On November 22, 2012, at 2:10 PM, bluesharpbob wrote:
Funny to read the 2008 WSJ article about the imminent end of the US. As a famous philosopher once said,'Stupid is as stupid does-& that includes writing!"
Report this Comment On November 26, 2012, at 10:57 AM, GETRICHSLOW2 wrote:
Jim Jubak on MSN Money site is also an excellent read.
Report this Comment On November 26, 2012, at 2:36 PM, Mathman6577 wrote:
Fox Business Channel is probably the best of the mainstream financial media. There is not as much hype and "goom and doom" as on CNBC and MarketWatch. if you looked at those two all the time you would never buy another stock again and keep all your money under the mattress.
Report this Comment On November 26, 2012, at 3:05 PM, superbinvesting wrote:
The most important thing you can do for yourself is understand the difference between fact and opinion and always search for the truth. There is no shortage of fluff and useless facts in the financial news and it’s your responsibility to filter through the noise and figure out what the markets are saying.
w w w (.) ingeniousinvesting (.) com
Report this Comment On November 27, 2012, at 8:24 AM, mikecart1 wrote:
Don't read financial news at all. Watch Mad Money with Jim Cramer weeknights at 6pm and 11pm EST. I recommend watching it twice in case you missed anything the first go-around.
(not srs)
Ok maybe. :D
Report this Comment On December 11, 2012, at 3:09 PM, thidmark wrote:
"you didn't mention John Mauldin and his "Outside the Box" articles ... good thing ! I think he's interesting but it's mostly just advertising his wares"
Boy, that sounds familiar. I wonder who else does that? Nope, don't tell me. It'll come to me ...
Report this Comment On July 24, 2013, at 1:50 PM, jason1241 wrote:
One option he said is that this may be one of the most difficult times in record in order to make investment decisions. I have a tendency to agree with that and furthermore his conclusion that the number 1 priority now was preservation of capital. In fact he confirmed my outlook at this time and so far no one has been able to counter that view in my opinion. -Jason, http://www.primeblog.us
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