Turn Off the TV!
by Rich and Sheila Jamison
We wrote, “Trust the process” to get you through volatile times (click here to review). Most of you indicated you understand our process. The most frequent question was how do I escape all the “the sky is falling” noise that makes it so hard to trust anything? I’d like to find solace in trusting the process. Can you make it easier?
From our title (and our history of repeating that phrase so often), you probably figured out our answer – turn off business television. Today, permit us to explain how and why that works.
Take a step back from yourself for a moment. Pretend you’re thinking about a family member, a friend, a colleague. Now look at what happens when he or she thinks about the stock market.
Two opposing – both debilitating – fears fight for your emotions.
The stronger of the two is the fear of loss. Somewhat offsetting this on the other side is the fear of missing out (or “FOMO”).
Both fears grab and intensify your emotions. Emotions short-circuit rational thinking. You can see where this is going, can’t you? The more the emotional input going into your decisions, the less rational the decisions coming out.
The prime way to reduce this process: turn off the TV!
“But, Jamisons,” you ask … “won’t I miss out on important investment advice?”
Our answer is “seldom.”
It’s crucial to recognize and remember that business TV is not in the advice business. It is in the entertainment business. Business shows are in the business of getting the greatest number of viewers in order to raise their advertising rates to maximize their profits. (Need some evidence? Watch the disclaimers for Jim Cramer’s Mad Money in which CNBC disavows any responsibility for pretty much anything said on the show.)
Many shows do present a diverse range of pundits – although you’ll note a preponderance of bullish guests on good market days and, conversely, mostly bearish guests on bad market days.
About the guests, a recent article by Vitaliy Katsenelson* puts the pundits in perspective.
“Business TV guests who provide their opinions on stocks have to project an image of infallibility (the opposite of humility). Again, I sympathize with them – they are there to market themselves and their business, and thus they must project the image that they have an IQ of 200, holding forth on every possible topic.”
Interesting thought, isn’t it? Katsenelson later adds,
“You are never going to hear from them the words that are the essence of investing: “I don’t know.” … since “I don’t know” is not part of their vocabulary, business TV guests will confidently answer questions that should never be asked, such as “What will the economy and stock market do next?” If you have been investing long enough, it is hard not to develop opinions (hunches) about what the stock market and economy will do next. However, good money managers work diligently to extinguish these hunches from their investment process, because those hunches lack repeatability.”
To get the emotions out of your decisions, get rid of the stimuli that promoted them. You’re not going to miss much, if anything at all, except all that pain and discomfort.
This appears to be the place to insert another of our oft-repeated mantras – nobody knows what the future will bring. So why suffer because of someone’s speculation. As Mark Twain once said, “I have spent most of my life worrying about things that have never happened.”
We’d prefer to think of it this way. If 90% of what we worry about never happens, wouldn’t it make more sense to focus on the 10% possibility of something amazing happening?
*Why Investors Shouldn't Watch Business TV. Vitaliy Katsenelson, Advisor Perspectives. April 1, 2019. Used with permission.
Past performance is no guarantee of future results.