Wednesday, July 13, 2011

Why Reading the Newspaper (Literally) Makes You Ignorant and Broke

In the year following March 2009, the month that the stock market hit its absolute bottom, The Wall Street Journal--a bastion of pro-business journalism--was tirelessly and relentlessly negative. Nearly every article, every investing think piece and every business story in this paper was bearish, pessimistic and downbeat.

Twelve months later, by March 2010, stocks had risen by some 60%.

If you had the singular misfortune of reading this newspaper strictly for its information and perspective, there's no way you would have invested any new money in the stock market at any time during that year.

Thanks for nothing, guys. Thanks for nothing.

What's more interesting, however, is why the Journal was so negative.

Here's the insight: a newspaper, even one created to help readers make forward-looking business decisions, can't tell you what will happen. It can only tell you what has happened. Moreover, the editors of that newspaper impose a perspective on readers as they decide what to write about and what not to write about.

As it turned out, the editors of the Wall Street Journal had formed their own little consensus--a deeply incorrect consensus--that things were bad. Really bad. And literal readers of the paper absorbed that perspective.

This is why reading the newspaper strictly on a literal level will separate you from your money. Had you meta-read this newspaper over that year, you would noticed a total dearth of positive, bullish articles, and a near-universal consensus in the media that things were terrible.

That would have told you to invest.