We are pleased to provide our readers an excerpt from the newly published book Clash of the Financial Pundits: How the Media Influences Your Investment Decisions for Better or Worse by Joshua M. Brown and Jeff Macke. The book is a unique look at financial media because few authors have had the experience on both sides of the investor/media divide.

In my book, Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere, I wrote about the attraction of a ‘media diet.’ That is a conscious effort to dramatically decrease the amount of media one consumes. The idea being that time spent consuming for the vast majority of investors is not just a waste of time but actively works against our best impluses as investors. I wrote:

If we investors are at risk of being overwhelmed by the modern media onslaught, what are we to do? Increasing our time frame is key. The rise of algorithmic trading should convince us that we are playing a losing game at shorter time frames. This frees us up to take what is best described as a “media diet.” A media diet, as practiced by Nassim Taleb, is a conscious effort to decrease the amount of media we consume. Most of what we consume is “empty calories.” Most of it has little information value and can only serve to crowd out other more interesting and informative sources.

In this excerpt from Chapter 1, Brown and Macke have a somewhat different take on the feasibility of ‘media diets.’  They note that instead of trying to block the media out entirely, which is a pipe dream, investors should try to become more sophisticated consumers of financial media by innoculating themselves against the worst aspects of it and above all try to gain some perspective on it all.

Excerpted with permission of the publisher McGraw-Hill from Clash of the Financial Pundits: How the Media Influences Your Investment Decisions for Better or Worse by Joshua M. Brown and Jeff Macke. Copyright (c) 2014 by Joshua M. Brown and Jeff Macke.


The Myth of the Media Diet

Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.

—Charlie Munger

In a perfect world, you can put your money to work across stocks and bonds, cash and commodities, REITs and real estate, and be done with it. You can allow your invested assets to grow like mushrooms in the dark, and go through life utterly unfazed by the daily doings of others and the unfolding of economic and geopolitical developments in real time.

Sounds great, until you realize that this is not a perfect world and that news actually matters as it pertains to your portfolio. Things happen.  These things can have an impact on the investments you’ve made and sometimes do require a reaction from you or at least a conscious decision about whether to react at all.

Paying no attention  to “the media” allows you the luxury of blissful ignorance, and if you plan to die young, we highly recommend  it. If, on the other hand, you have some hope that your portfolio will help you to maintain your purchasing power through decades of retirement  and  complement  whatever money will or will not be there from Social Security, then you may want to set your news and media consumption  limits surgically as opposed to absolutely.

This is not to say that being aware of the news will help you become a better investor. In fact, there is a strong case to be made that prolonged exposure to headlines and commentary  has a bet- ter chance of becoming a hindrance  to successful investing. But because time marches on and history is constantly unfolding— sometimes  slowly and  sometimes  suddenly—the  news becomes an inexorable part of the equation. It can no sooner be eliminated than can gravity or the tides.

It can be helpful, therefore, to keep in mind the following: awareness does not necessitate action. Being informed should not automatically mean you are goaded into actually doing something. Sometimes the added knowledge from an article is good enough— most times, in fact.

Most shock diets fail, and weight gain is the inevitable result. The same is true  for media  diets. “I’m going off the grid for a while” is what  the  frustrated  market  participant  typically says after becoming frazzled by the day-to-day noise of the news. This is admirable. Only it never lasts, and the old habits of sloppy, unordered consumption  return, just as the fasting fat man comes right back to the eating habits that got him there to begin with once the attempted starvation has failed.

Regular news consumption  helps you develop the ability to sort out what matters from what doesn’t. How many projections from “professionals” have you observed as being far from accurate in the final analysis? How many brilliant minds and eloquent speakers have themselves been fooled by their own inability to extrapolate their present beliefs into the future? It is partly amusing to witness this wrongness play out, but it is also partly frightening to watch as the smartest, most experienced people with unlimited resources and research capabilities at their fingertips come to such incorrect conclusions: “They’ve got analysts and Bloomberg terminals and inside contacts and analytics and a career spanning decades! If they can’t get it right consistently, what hope is there for me or anyone else?” At a certain point, the folly of forecasting becomes obvious. It is at the dawning of this realization that we begin to grow as investors.

The catch is that we must ourselves be fooled by the forecasts of others in order for this larger wisdom to set in. We must believe and live through  the shattering of these beliefs before a stronger, better set of beliefs can be rebuilt on the rubble. This is rarely an event—rather,  it is a process. The path  to investment  enlightenment is bracketed by blaring flat-screen televisions on either side and a cobblestone of price targets underfoot. Our disenfranchisement with “the system” is the impetus that sets us on this road, and we are propelled for the first few miles by tears and the pangs of regret over letting ourselves be so gullible.

That which does not kill us makes us stronger, said the philosopher Friedrich Nietzsche, shortly before contracting syphilis, having a mental breakdown in the street, and then dying from some combination of manic-depressive illness with periodic psychosis, multiple strokes, and paralysis resulting in the loss of speech and mobility. Okay, so Nietzsche is maybe not a great example of this concept personally. But his aphorism does mostly ring true as it pertains to our ability to withstand that which we are regularly assaulted with.

Two weeks after getting a flu shot, your body begins to produce antibodies to fight off the “foreign invaders” you’ve introduced into your system. This willful triggering of a physiological response is a form of training. Should your body encounter an actual influenza virus later in the season, it will remember what its response must be, and a counteroffensive from the immune  system is launched quickly  until  the  hostile  attack  is  neutralized.  But  immunity doesn’t last forever, nor can it cover every new strain, which is why a new vaccination is required every fall.

In much the same way, investors who wish to maintain control over their responses to the bombardment of “breaking news” need to continually introduce  it to their decision-making process. Isn’t the weightlifter constantly tearing and stretching his muscle fibers so that they can more robustly reconstruct themselves?

A true media diet virtually assures an overreaction to market volatility and expert prognostication once the dieter returns to the flashing lights and headlines. And how well equipped can one be to cope with the stimuli—the blinding rays from a thousand  Las Vegas billboards and the deafening roar  of bells and whistles— after too much time spent in solitude?

And so if haphazard  digestion of financial media is disruptive to our composure and total ignorance of it dangerously lowers our resistance to the worst aspects of it, what can we do? How can we reconcile our concurrent need and revulsion?

There are several tools at our disposal. These include setting of boundaries, intelligent curation, methodical and scheduled intake, awareness of one’s own investing time frame, a healthy skepticism, the ability to contextualize and order information, some grounding in market and economic history, and, last, a good sense of humor.


Joshua M. Brown and Jeff Macke are the co-authors of Clash of the Financial Pundits: How the Media Influences Your Investment Decisions for Better or Worse from the McGraw-Hill.

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