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Let's see if I can touch on your worst fears:
A collapse of the banking system and the insolvency of the FDIC is surely among them.
The Comptroller General advised the Senate Banking Committee that both were likely in April, 1991.
An "unprecedented" worldwide "economic convulsion" -- Newsweek used the quoted language in September, 1998.
A fundamental change in the world's economic condition. Fortune reported on that view in September, 1998.
The worst economic conditions since the Depression. Time made that observation in June, 1970.
Investor "shock felt round the world" was breathlessly reported by Time in November, 1987, complete with a story about a trader who withdrew $100 from his ATM because it gave him "a sense of security."
Pillars of the NYSE crumbling from the onslaught of a huge bear graced the cover of Newsweek in September, 1974.
The triple whammy of "inflation, recession and a frantic bear market" was reported by Life magazine on the cover of its June 5, 1970 issue.
A "panic on Wall Street" was headlined by the Philadelphia Inquirer in its October 20, 1987 paper.
My personal favorite is the August 13, 1979 cover of Business Week, which featured a story titled "[T]he Death of Equities."
In these tough times, the media does it best to convey the impression that it's really looking out for the best interest of the humble investor.
In its September 28, 1998 issue, Fortune's cover screamed: "The Crash of '98. Can the U.S. Economy Hold up?" The Managing Editor explained that Fortune was "dedicated" to making sense of the "scary" financial situation.
How helpful!
I am not trivializing the current financial crisis. I have no idea what direction the markets will take in the future. What I do know is the financial media have a vested interest in hyping extreme conditions because it is in their economic interest to do so.
Investors can learn from the terrible track record of the media in predicting the future of the markets. They are not a reliable source of information.
What are your alternatives?
Consider the 80-year history of the markets, which have experienced ten bear markets. Look at long-term risk and reward data. Read books that have peer review, academically tested data supporting intelligent investing principles. There has been a trend by authors of these books to write them in way that is easily understood by everyone. John Bogle's book, The Little Book of Common Sense Investing, is part of this genre.
Ignore the financial media, unless you find it entertaining.
The big wooden horse the Greeks gave the Trojans was not a gift. Neither is the information provided with such confidence by most of the financial media.
Dan Solin is a Registered Investment Advisor and the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books 2008).
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Reader Comments (Page 1 of 1)
9-29-2008 @ 5:48AM
Tom said...
Micheal Moore has sent out an email about how this 700 Billion Dollar Bail Out is just the last chance for Dubya to raid the Treasury on his way out the door.
Think about it: Who do you trust?
A. The smirking frat boy who never ran anything sucessfully in his life and who lied his way into his job.
or
B. The fat slob?
This 'oh we gotta do it right now or else!' attitude brought us the Patriot Act and the Iraq War.
On this one, the fat guy has my vote.
10-04-2008 @ 11:19AM
ralph said...
Tom, it would be nice if you got your head out of your back end. If you want knowledge and not b.s. "Google the community reinvestment act". Also try looking up the 2004 house sub commity on fannie and freddie and you will hear dem after dem saying the problem is not freddie and fannie but the regulator. One after the other telling Rains what a great leader he is. We all know he stepped down in shame with nearly 100 million dollars after cooking the books. This had nothing to do with Bush who tried over and over to get this fixed. They cuold not get the 60 votes. Shame on the Dems And Repubs. The information is there for the taking.