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Apprenticed Investor: Lose the News

Avoid the Headline of the Day

The news machine needs to create an enormous amount of content to have product to sell. Hours on TV and radio, pages in print and on the Web. Remember, most media are advertising-driven, and it requires all that content to be able to sell all those ads. (That's why jokers like me are on so often).

Just think about some of the recent headlines and their impact on both markets and individual stocks. The CEO of a major brokerage firm resigns -- who cares! Martha gets out of jail: Whoop-de-doo!

The media focus on the "sensationalistic or scandalous, rather than market-moving," observes Real Money.com trading diarist James "Rev Shark" DePorre. "Stuff like the firing of a CEO, the housing "bubble" or Martha Stewart's latest travails may be interesting, but they don't help you much with your investments."

I agree with Shark's contention that the "media are at their best when they focus on emerging market trends." You know, the stuff that has yet to make the magazine covers or major headlines. That may give you a push in the direction of an investable theme. Unfortunately, this sort of coverage is rare and often found in specialty magazines such as Wired, CFO and The Economist.

There are exceptions to every rule, and this one is no different. The most valuable thing the media can do for you is to grant you an audience with people you might not have access to otherwise.

It's particularly useful to see or read the wisdom from those people who do not need the publicity and have no agenda. They are merely identifying issues that they believe need to be addressed and that often are not.

This isn't to suggest that you should blindly follow the star investors: Simply because former General Electric (GE) chairman Jack Welch or Berkshire Hathaway's (BRK.A) Warren Buffett say something will happen is no guarantee it's going to come true. When others are opining about what's to come -- even the greats -- you should have a healthy skepticism.

Still, I will closely listen to any investment giant who has a spectacular track record over long periods of time, meaning his or her performance is not the result of mere chance.

1. Expect to Be Wrong 2. Your Fault, Reader
3. The Wrong Crowd 4. Bull or Bear? Neither
5. Know Thyself 6. Prepare for Battle
7. Bite Your Tongue 8. Don't Speak, Part 2
9. The Zen of Trading 10. The Folly of Forecasting
Check back for more of Barry Ritholtz's
Apprenticed Investor series
A few examples: T. Boone Pickens on Kudlow & Cramer a year ago saying oil's price rise was not a temporary phenomena; Julian Robertson on CNBC discussing the dollar; Former Federal Reserve Chairman Paul Volcker identifying structural imbalances in the U.S. economy in The Washington Post; and the Barron's interviews with folks like Ned Davis, Ray Dalio, Walter Deemer, Seth Glickenhaus and others.

Giving you access to such financial luminaries is one valuable service the media provide for investors. As for the rest, savvy investors know it's mainly just noise and entertainment.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there from TheStreet.com.

Barry Ritholtz is chief market strategist for Maxim Group, where his research and market analysis are used by the firm's portfolio managers and clients in the U.S., Europe and Japan. He also publishes The Big Picture, his macro perspectives on the economy and geopolitics, entertainment and technology industries, and is a member of the board of directors of Burst.com, a streaming media software company. At the time of publication, Ritholtz had no position in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Ritholtz appreciates your feedback; click here to send him an email.

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