Why Investors Should Follow the Trend Lines… Not the Headlines
- Constant media negativity makes investors even more risk averse than they naturally are.
- Today, Alexander Green explains why you need to follow the positive trend lines – and ignore the headlines – if you want to grow your wealth.
Human progress is a historical fact.
People are living longer, healthier, safer, richer, freer lives than ever before.
Not just in the West but worldwide.
Yet polls show that most of us don’t recognize this.
Why? Because we get our understanding of the world from headlines… not data.
While the vast majority of Americans live lives of peace and prosperity, the media delivers the world through a prism of melodrama filled with violence, crime, corruption, environmental degradation and natural disasters.
Most of the things that happen suddenly are bad: a shooting, a terrorist attack, a scandal, a wildfire, a hurricane, an epidemic and a financial panic.
Journalists relish these events.
Why? Sensational stories attract eyeballs. Eyeballs attract advertisers. And advertisers are media’s bread and butter.
Progress, on the other hand, isn’t newsworthy because it tends to be slow and continuous.
For example, every day for the last 25 years, newspapers could have run the headline “130,000 People Escaped Extreme Poverty Yesterday.”
That’s a good thing. But it isn’t news.
Therefore it doesn’t get reported – and most mistakenly believe that global poverty is getting worse.
Why do these things matter?
Because to be a successful investor, you have to maintain some optimism about the future.
Otherwise, why risk your hard-earned capital?
Too many investors forgo opportunities because they don’t appreciate – or even recognize – the vast improvements taking place in our quality of life.
Last month Gallup asked, as it does every month, “In general, are you satisfied or dissatisfied with the way things are going in the U.S.?”
Only 36% of respondents said satisfied, even though the nation is at peace. Joblessness is at a half-century low. Wages are rising at the fastest pace in more than a decade – and climbing fastest for low-income workers.
American life expectancy has never been longer. Living standards have never been higher. Educational attainment has never been greater.
Cancer is in retreat. Violent crime is in a long-term cycle of decline. Domestic abuse is down. So is the divorce rate. And so are abortions.
Air and water quality have been improving for decades. U.S. carbon emissions are lower than they were 15 years ago.
Our economy is the envy of the world.
No doubt you’ve heard the American middle class is vanishing. But are you aware that’s because more people are moving up, not down?
Median household incomes and net wealth have never been greater. And the stock market continues to hit new highs.
So why are 62% of Americans so glum? Consider the relentless negativity of the mainstream media.
Only sad, tragic, frightening, corrupt or evil events are considered newsworthy. (Hence the old media truism “If it bleeds, it leads.”)
This is due, in part, to what can reasonably be considered news.
Few people want to hear each day about the buildings that didn’t burn, the planes that didn’t crash, the businesses that didn’t fail and the surfers who weren’t bitten by sharks.
It’s the exceptions – especially the sensational ones – that grab the headlines and the airtime.
As a result, we get the most depressing news about the most hapless people in the most unfortunate places 24 hours a day, seven days a week.
This distorts our perspective and makes it easy to believe that life really is just one damned thing after another.
Media negativity makes investors even more risk averse than they naturally are.
That can dramatically lower investment results, as the safest securities – by definition – return the least.
I challenge you to approach everything you read and hear in the media with a deep sense of skepticism – and a few basic questions like these:
- Is this story based on facts… or opinions?
- Does it include counterbalancing data or not?
- Has the journalist made a reasonable effort to put the story in context?
- Is this narrative overly pessimistic?
If you’re going to invest what you’ve worked hard to earn and save, you need to feel a bit of confidence about the future.
That’s a tall order for people who binge-watch the daily litany of sad, tragic or unfortunate events that happened – or could possibly happen – in politics, health, economics and business.
Recognize that “the daily news” is not an objective account of the state of the nation or the world.
Feel free to watch and read less of it to avoid becoming unduly anxious or fearful.
And, most important of all, follow the trend lines not the headlines.
We live in an imperfect world with serious and difficult problems.
But human ingenuity, technology and capital markets are continually at work on them.
Despite the picture painted by the mainstream media, things are getting better for most people in most places in most ways.
That’s something for investors to celebrate – and capitalize on.
About Alexander Green
An expert on momentum investing, value investing and investing based on insider activity, Alex worked as an investment advisor, research analyst and portfolio manager on Wall Street for 16 years. He now runs the wildly successful Oxford Communiqué, ranked as one of the top investment newsletters by Hulbert Digest for more than a decade. He is also the author of four national best-sellers: The Gone Fishin’ Portfolio, The Secret of Shelter Island, Beyond Wealth and An Embarrassment of Riches. He shares his wisdom in his free daily e-letter, Liberty Through Wealth.