An Instant Gratification Society… The Financial Media’s Dream
In the fast paced world we find ourselves, most everything is delivered to us quickly. Whether it’s your Amazon order, your GrubHub meal, the latest TikTok video or the topic du jour on Twitter… you want it fast. You want to get it as quick as possible and be able to digest it even faster (i.e., if it’s something that requires reading, keep it under a minute or many are not interested). Believe it or not, this is by design. The moment Apple put a mini computer in the palm of your hand, the race by companies to give you what you want as fast as possible, was on.
Apparently, the financial media has gotten the message and is running with it… no matter how damaging it can be to an investor. Unless there is an interview with a CEO, the financial media is in the business of giving us headlines to inspire reaction; many times negative headlines that conjure up, well… negative feelings. This can only lead to viewers making short term decisions they will most likely regret in the future.
Yesterday, within a five minute span, I heard a squak box anchor first question how in the world is the stock market rising when we have such a horrible looking economy. A somewhat logical question, but then went on to use a two-month stock chart for The Gap (GPS) as exhibit A to prove his point of an overvalued stock market. THE GAP!!! The operative word(s) here are “-month” and “The Gap.”
As long-term investors, you have to wonder why CNBC would throw this stock chart up on it’s screen? I mean does anyone under 30 years old even know what The Gap does? I can’t think of a more irrelevant company in today’s society. But, they put this two-month stock chart up that shows the stock is up over 100% during this period because it supports their argument that the stock market is overvalued. Period.
If I am new to investing, I see that story (and chart), I turn off my TV and think… “Wow, the stock market has to be overvalued. I mean, look at The Gap… the stock is up over 100%. I better start selling some positions to avoid the pending meltdown.”
Thankfully, I started my investment career prior to the advent of headline business news and understand a two-month period does not make the stock market. In this particular case, if you took a few extra minutes and pulled up a five-year stock chart for The Gap, you would quickly recognize that there has been a serious loss of market value (69% to be exact) over the past five years. What was once a $35 stock had bottomed out at $5 in March and has now more than doubled to nearly $12 a share. Woohoo!
The truth is, The Gap is a troubled apparel retailer whose future is very uncertain… and the stock has represented this for the past five years. It’s current price is very low compared to where it once was, so a sharp move up (doubling) is not uncommon. But, within a few minutes, to show a two-month chart and insinuate this is an example of why the stock market as a whole is overvalued is pandering to the instant gratification crowd. The financial media gives them what they want (quick info) with our spin (negative news) and our business is good (i.e., we sell more ads).
Moral to the story: quick delivery for your Amazon orders is great… For your investment news, not so much. Do your homework!
Note: Nothing contained herein this letter should be considered to be investment advice, research or an invitation to buy or sell any securities. The charts above are from Yahoo Finance.