What is the purpose of financial news? Seriously, what purpose does it serve? On some level it provides us with a common base of knowledge so we can communicate with other people in the markets. Ben Hunt at Epsilon Theory recently wrote:

It’s not what the crowd believes. It’s what the crowd believes that the crowd believes. The power of a crowd seeing a crowd is one of the most awesome forces in human society. It topples governments. It launches Crusades. It builds cathedrals. And it darn sure moves markets.

Hunt goes on to talk about the mechanism by which this information is moved through the markets: financial media outlets like the WSJ, FT, CNBC and Bloomberg. The problem is that beyond acquiring some base-line information, it is not altogether clear whether any of what you read is at all actionable. Stefan Cheplick writes:

I know no great investor who has ever attributed their success to news or headlines. If you know anyone who thinks like this, I will be straight up in awe…The money in headlines is shaking people out. It’s tricking them into dreams of grandeur, then shattering them. Headlines are glass castles.

Those glass castles can be expensive, as Cheplick notes how many newbie cryptocurrency traders got sucked into Bitcoin at the worst time possible. Another investor, Howard Lindzon makes a similar point:

This is the exact reason I gave up news/information from ALL of the above (I would pay for a Bloomberg Terminal if I had the budget/luxury). They gave me ZERO edge. Turning them off completely is what finally gave me an edge.

This is due in part to the nature of the news, especially in today’s day and age, when headlines can be A/B tested to insure the highest click through rates. Josh Brown at The Reformed Broker notes that the humdrum, everyday news doesn’t get published:

106,000 or so flights take off and land every single day, almost always without incident. That’s why it’s news when one doesn’t.

Market activity is much the same, almost every day represents a day without a crash…And so anything that has even the slightest imprimatur of potentially crash-y activity leads the headlines.

We can’t all be like this Ohio man who has gone to great lengths to avoid any, and all, news since the 2016 election. It simply is too much work. We can however choose to engage the financial news on our own terms. Those terms should include a knowledge of how the game is played and how not to get played in the process.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Please see disclosures here.

Please see the Terms & Conditions page for a full disclaimer.