In yesterday’s post I mentioned seeing something on CNBC which opened the door to a good conversation about how much, if any, stock market television to consume or what role it should play, if any, in participating in the market. Like the portfolio itself there is no single right way to consume information. Personally I want to consume as much as possible.
One reader noted that the business model of television is to sell advertising. While that is true, news channels tend to want to report the news as well. There may be, and probably are, biases and conflicts that exist in the running of a network, conflicts and biases from some portion of the reporters and conflicts and biases from some portion of the people being interviewed but if something bad happens to Archduke Ferdinand during the day then chances are it is going to get covered.
If, as I said yesterday, you have eight tabs open on your browsers with articles to read and you do not have your TV on a news channel and something big happens then you will not know about it for a while. While knowing that something has happened may not result in a trade some people would want to know right away and some would not care. Which are you? The answer to that question contributes to whether or not your TV is likely to be tuned to a stock market channel.
Occasionally the news will trigger a trade and in those instances, timeliness matters. A few May’s ago I woke up one morning, flipped on CNBC and the news of the morning was that Microsoft (MSFT) wanted to buy Yahoo (YHOO) which we owned at the time. Generally I am a seller right away if a holding catches a bid. The highs of the day were in the premarket and obviously the stock has not been that high since. It is not knowable how quickly in the day I would have stumbled across the news but by flipping on the TV first thing it was literally the first piece of news I had that day.
A different example I have used before was the GM bankruptcy. We did not own the stock or the debt but it was a big story and it was talked about to excess on CNBC whatever the biases and conflicts of anyone talking about it. This saved me time reading about something that realistically had no direct effect on the portfolio. I think that is a constructive leveraging of time.
For people reading this site who are advisors they have clients who will ask questions about newsy things that probably have no direct impact on the portfolio. In that instance “I don’t know” is not an answer you want to give. Too many “I don’t knows” and you probably start losing clients. For some who work in the industry there is the opportunity to talk about these things in the media. I appear on CNBC two or three times a year which at that frequency is a fun novelty and has opened the door to some experiences I would not have otherwise had. It is ok to have fun with your job.
More important to the portfolio is that if you are a top down person then the important decision of being defensive or not is based first on the big picture of the world. Being a news junkie has helped us over the years, especially with what to avoid. I’ve disclosed in previous posts that we sold Barclays in December 2007 and Allied Irish Bank in March 2008 in part because “how many times are you going to read that the housing market in the UK and Ireland are in serious trouble before you sell.” Having CNBC Europe on for an hour every mid morning contributed to that and these turned out to be important sales.
This utility can still exist while you tune out Jim Paulsen and Thomas Lee.
Any or all of the above might sound exactly right for you or utterly ridiculous but again there is no single way right way. Media outlets are a tool to be used as much or as little as you see fit.