Apprenticed Investor: Lose the News
Have you ever noticed how the stock market reacts differently to the same reported events?
Why is it that we sometimes sell off "in response to rising oil prices," but at other times the "market rallied, despite the rise in the price of crude"?
How come a selloff was caused by a suicide bombing in Iraq, but a week later, the markets shrugged off an even larger, deadlier bombing? Is it possible that the markets are responding to forces other than the latest headlines?
Short answer: Absolutely. Yes.Longer answer: Keep reading. As we discussed last week, it's clear that predictions of pontificating pundits have an extremely short shelf life and can be safely ignored. But it's not just the talking heads who can throw you off your game. The value of the entire financial news complex -- both print and electronic -- seems to be hugely misunderstood by investors. Even worse, many investors misapply what they hear; they ignore data, focusing instead on headlines and occasionally, the opinions. There are at least three problems with this approach:
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