What do the weather forecast and the daily stock market movements have in common (sounds like an introduction to a bad joke, right)? To illustrate, let me quote a portion from a column I read this week by Vitaliy Katsenelson, the CIO of Investment Management Associates.
“Serious business news that lacked sensationalism, and thus ratings, has been replaced by a new genre: business entertainment (of course, investors did not get the memo). These shows do a terrific job of filling our need to have explanations for everything, even random events that require no explanation (like daily stock movements). Most information on the business entertainment channels – Bloomberg Television, CNBC, Fox Business – has as much value for investors as daily weather forecasts have for travelers who don’t intend to go anywhere for a year.”
According to the dictionary, sensational can mean either 1) conspicuously excellent or 2) designed to produce a startling effect. Which one really describes the business news that’s being reported to us? While humorous, the essence of what Katsenelson was trying to communicate is spot-on. Market volatility is not a new phenomenon, but following the intraday stock market movements is. Growing up, I used to hear Walter Cronkite report on the stock market and it took little more than 7 seconds. It has now become headline news. The question one must ask is: what is the value you derive from a daily dose of this? Understand, we are not recommending being ignorant about what is going on in our world. What we are recommending is to not let sensational reporting determine your long-term investment strategy.