Market Analysis

Grumpy Journos, Happy Market

When media headlines are uniformly dour, it's not proof of hard times ahead. Rather, it's likely just the opposite!

Add "dour journalists" to MarketMinder's "Stuff We Like" list—right up there with Capitalism, free trade, iron clad property rights, stymied politicians, and sushi. (What? Sushi is good.) When the media's so uniformly aligned in grumpy analysis the market and economy are doomed, we feel pretty confident saying, "Yahoo! Now's a GREAT time for the market!"

That's not to say you can't find some rational, reasoned articles accurately portraying the state of the market and economy. (Check our "Stories of Interest" each and every day.) But it does seem as though general acrimony over subprime is infecting other areas of reporting, telling us journalists are just searching for reasons to be dour, and nothing much material is wrong, economically.

For example, here's the obligatory, front page subprime/housing bubble headline:

Home Prices: No Relief on Horizon
By Les Christie,

According to this article, home prices are sliding and will never stop and that's bad. But why? Just saying something's bad doesn't make it bad. Our research shows periods following flat or falling real estate prices have seen positive, above-average stock returns 6, 12, and even 24 months out, and we find no historical link between home prices and the economy.

What's more, as stated in the preceding article: "43 percent of all homes on the market are affordable to local residents earning median household incomes, up from 40.6 percent a year ago." But this article spins the increase in home affordability as a negative! Why? Don't we want more people to be able to afford homes, therefore qualifying this as "good" news?

Here's another negative headline from today:

Confidence Falls Sharply in August
By Greg Robb, MarketWatch

Boo! Stuff falling sharply is bad! But nowhere does this article explain the relationship between consumer confidence and stock returns. If it did, no one would ever write about consumer confidence ever again. There's no connection! Consumer confidence is backward-looking and is in no way predictive of future stock returns.

What about this one?

If We Are Rome, Wall Street's Our Coliseum
By Paul Farrell, MarketWatch

Yawn. Can't anyone come up with a fresh metaphor? (Here's one. The US is Dionysus and we are frenzied Bacchae—drunk on debt—destined to tear society to pieces, just like poor teetotaling Pentheus. Discuss.)

Allegedly, the US is a crumbling empire because we're overindebted. Hogwash. (Our view is the US, in aggregate, is provably under-indebted, but that's a discussion for another day.) Maybe, if the Roman Empire had access to as much liquidity from myriad global sources and as many risk-hedging vehicles as is available to US investors—both individual and institutional—it might have dominated for another 1000 years. And consider, developed world economies are highly correlated. If the rest of the world is doing just fine, as the article implies, and only America is naughtily overindebted (an assertion we heartily disagree with) won't the thriving non-US 65% of the global economy drag us along too? (Answer: Yes.) What's more, if you invest globally, it doesn't matter which country gets to chant, "We're number one!"

Need more evidence journalists are reaching for dour storylines?

As Bees Go Missing, a $9.3B Crisis Lurks
By David Stipp,

As if we didn't have enough crises, now we have to worry about the disappearance of millions of bees! Apparently, bees have been mysteriously dying off (dubbed "colony collapse disorder" or CCD), and if left unchecked, agriculture will suffer, the economy fail, the moon turn to blood, etc. etc. What a bee-saster! (Don't get too worried yet. Apparently, CCD is common every 10 years or so, and bee keepers are reporting a return to normalcy of late.)

Let grouchy journalists craft all the historical, biological, literary metaphors they want. If recent market activity were signaling a market peak rather than a correction, we wouldn't be seeing news stories about the US being a crumbling empire, soon to be irrevocably toppled by subprime and missing bees. Instead, we'd be seeing euphoric headlines about New Economies and New Paradigms. (For more, see "Bearing with Bulls")

Dour sentiment, as reflected in journalists' peevish headlines, signals there's plenty of upward buying pressure left in this market. Focus on the little-noticed good news (earnings walloping expectations, benign interest rates, a growing global economy) and know, when journalists are grumpy, it's a great time to be in the market.

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