Market Analysis

Exercising Caution With Cougars, Countdowns and Congress

With the abundance of news sources today, discerning what’s important and what’s not is more crucial than ever.

We’ve said many times we think Washington will ultimately strike a deal rather than face the political (not economic) Armageddon that would likely accompany anything less. And we still largely believe that—though time is inarguably running short (and politicians have a propensity to grandstand until the last minute). For more on those views, here, hereor here.

And as the debt ceiling approaches, the hysteria continues to mount. Look no further than the below—a brief round-up of some of the better highlights making news Friday:

Not only are stocks slumping (according to the article), but GDP appears to be melting (according to the graphic on that page). Never mind that it grew again in Q2 2011, marking two full years of growth.

Ignore the fact that in the unlikely event that clock runs to zero and there’s no deal, the US doesn’t automatically default. Not to mention there’s some debate as to whether August 2 is an accurate drop-dead date as well.

  • And one memorable blog is today likening the remaining options available to Congress and the President to Lord Voldemort, of Harry Potter fame: Lord Voldemort Debt Ceiling Options Increasingly Becoming Speakable.

We hardly think the options on the table that dire.

And if the continuing debt debate weren’t enough, there’s this troubling story of a mountain lion who apparently wandered from South Dakota’s Black Hills all the way to Connecticut, where it met an untimely death. Note this isn’t some short, human interest story published in a local Connecticut or even South Dakota paper. This is an op-ed in The New York Times—widely considered one of America’s preeminent news organizations. An op-ed—meaning someone has an opinion they think important enough to share on a cougar’s travels and travails.

Add that to the list of European debt woe stories and news of US GDP revisions, and one thing becomes eminently clear: There is a (somewhat overwhelmingly) large amount of noise in news today—some legitimate and worthy of notice, much purely distractions or distortions.

Let’s face it: We live in a world of 24-7 news coverage where not only the large, historically recognized media outlets report news, but also your average Joe who happens upon a story he finds newsworthy and promptly tweets it. “News” is captured on cell phones as it unfolds, posted to YouTube and subsequently “goes viral.” Anyone with an interest in just about anything can start a blog and broadcast their opinions to anybody with an internet connection almost anywhere. This exponential multiplication of “news” sources means we have unprecedented access to information—which in theory should allow us to make better-informed decisions. Want to buy an electric toothbrush? Google it and read consumer reviews to your heart’s content. Want to learn how to install kitchen linoleum? YouTube has hours’ worth of video to watch. From an investment standpoint, there are also benefits: More transparency and heightened awareness of issues—real or perceived—speeds the market’s ability to discount the widely known.

But this also poses a significant challenge: sifting through the noise to find the material news—especially in the midst of particularly contentious debates, like the current one over the debt ceiling. The reality is debates like this have gone on since reasonable people (or politicians) could disagree about the way something should be accomplished—whether in government, on a sports team or in a family setting. And as the volume of media has grown, so has the need to fill that volume with something—whether rational, irrational, interesting, completely irrelevant or somewhere in between. But like it or not, facts remain facts, and just because one side has more bloggers than the other doesn’t make their case more or less right. Volume (cyber- or otherwise) doesn’t necessarily equal validity.

There’s lots of noise in today’s world—some attention-worthy, some less so. And as investors, it’s important to sift through it to find the kernel of truth worthy of acting on. In reviewing Friday’s “news” included above, a seemingly daunting task—but one infinitely worth pursuing.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.