Aug

5

Wall Street and the Media

Posted by cameron

August 5, 2007 |

It’s been an interesting week on Wall Street. The markets have become extremely violent as just about everyone knows. Pundits are beginning to run for shelter as the credit crunch spreads little by little. I noticed that advisors are retreating to 50% stock positions, which, of course, helps to drive this market down. Although a little late, it is a shrewd strategy because it provides 50% liquidity to buy back into bargains at the bottom. It does not appear that we are at bottom yet and will not know we were there until it is over.

In the spring of 2006 we had a near official correction and I remember the talking heads on the media spreading doom and gloom. “This is terrible” one expert said before giving advice on defensive investing. Of course it was too late by then. I have noticed a continuous stream of doom reporting by the same media marking the darkest moments of a market correction. We all know the media focuses on the bad news and it is the frequency and bleakness of those reports that signals for me the right time to be easing back into the market. I call it the “Diane Sawyer Effect”. The media is always reporting on something that has already happened so when they think it is time to get out (too late of course) then it is probably time to get back in. We are beginning to receive that drumbeat from the media although it has not yet reached fever pitch. I suspect that is yet to come. Judging by this week’s edition of Business Week the drums are no longer silent but real anxiety is not yet priced in the market. The coming few weeks and months will be violent on the street. Having a long-term perspective removes that anxiety. Sleep well!


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