You Are What You Read

Read With Caution When There’s Money at Stake
Know your authors, their biases and their tracks records.
Bloomberg, April 12, 2017




Several recent news items, taken together, serve as a reminder to investors: be careful what you read, especially if you are going to put dollars at risk.

Let’s look at three recent items. The first was the  Securities and Exchange Commission enforcement action against hustlers using the website Seeking Alpha to run an illegal stock promotion scam. (Disclosure: From 2006-08, I allowed Seeking Alpha to rerun some of my written work.)

The second item was the announcement of the 2017 Pulitzer Prize awards, given in recognition of outstanding journalism. The third was a very interesting column titled, “The ongoing challenge of content generation (and curation).”

That they occurred within a week of each other was serendipitous. Each relates to an important issue that affects everyone in the capital markets: who and what to read and how does that influence your views?

This is an issue I have long tried to drum into readers (see this, this, this, this and this). The SEC action cited above is just one in a long list of pump-and-dump stock promoting scams. If it weren’t so familiar, it might be more interesting. Of course, there are, as you might expect, several clear lessons for investors and traders who are trying to navigate their way through the thicket of news and noise:

No. 1. Know what you’re reading. It may be obvious, but it seems to need restating: You should have more than a passing familiarity with those writing about finance. Authors, analysts, firms, websites, news organizations all have a history. You should be familiar with what they cover, their track records and any biases or conflicts.

It isn’t always easy, but you should at least make the attempt. Obviously, I write for Bloomberg, and you might assume that I favor professional media outlets. But I have also maintained a blog for the past 15 years, and value the meritocracy of alternative information sources. I also have a money-management firm that favors low-cost investment over stock-picking and alternatives such as hedge funds or venture capital — so my biases are there for all to see. 2

Investors should perform the same sort of analysis on any author, analyst or media they consume. Otherwise, they are unwittingly accepting opinions and commentary without an awareness of how they may be skewed.

You need to develop your own version of the Pulitzers, reading those who add value and insight and skip those who don’t (or worse, mislead).

Originally: Read With Caution When There’s Money at Stake



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