Updated from 1:54 p.m. EDT
Here's the headline on yesterday's headlines:
"Headlines Suck Eggs, Guaranteed to Tie off Reason and Mislead."
I'm simplifying the case a bit here, but what can you expect from a headline? The Business Press Maven has said this before: Always read past the headline, which can truncate reality like little else.
It's hard to sum up a story in five words. And sometimes -- as in the case of the bulk of yesterday's stock market coverage -- headlines are just the messenger. Often they summarize a careless article. Other times, as in the case of yesterday's coverage of
Goldman Sachs'
(GS Quote - Cramer on GS - Stock Picks)first quarter earnings, the headlines themselves are at fault for telling only half the story.
So again, always read the article, but remember: Even if you do, a problematic headline may stick in your mind long after the complexity of the article has faded.
They Just Don't Get Goldman! |
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First under the microscope: Yesterday's headlines about Goldman Sachs. Here's a headline from the Associated Press that's oddly giddy considering the carnage at Wall Street's banks:
"Goldman Sachs beats 1Q expectations."
Wow!
Bear Stearns (BSC Quote - Cramer on BSC - Stock Picks) is swirling around in a toilet, and Goldman is dancing a gavotte?
Not so fast. Here's a headline from the
International Herald Tribune:
"Goldman earnings fall by half."
Hmm. Glance at those few words without reading the story, and it seems like Goldman might have joined Bear Stearns in the swirl, no? Well, get your mind out of the toilet. Brace yourself, too, for an Associated Press headline for a story about Goldman and
Lehman Brothers'
(LEH Quote - Cramer on LEH - Stock Picks) earnings, which yelled:
"Investment banks soar on strong earnings."
What's so sad is how easy it is to give the savvy investor a mechanical advantage in the stock market through a headline that captures all the key angles of a story. Kudos to Reuters for getting it right:
"Goldman earnings fall by half, yet beat views."
That I could find only one headline that tells the full story proves that investors need to be wary of what they read at the top of the page.
Think the Goldman headlines were bad? Wait to you see those about the Fed's most recent rate cut:
According to
The Financial Times:
"US stocks rally after Fed interest rate cut."
If The Business Press Maven had a nickel for every headline like this he read Tuesday, he'd be able to upgrade from a Chevy to a Caddy.
The Associated Press went the same way with it:
"Fed cuts interest; stocks soar." And so did
Business Week, which could have said much more in the space the subheadline consumed:
"Stocks Soar on Fed's 75-Point Rate Cut: Equities surged Tuesday after the central bank provided another boost to liquidity, citing concerns over growth and heightened inflation risks."
Got that? A simple and definitive case of cause and effect. Only it's wrong. Stocks apparently surged
after the Fed rate cut. Never mind that the Dow was up about 300 points
before the rate cut, so the better part of the advance came ... in advance.
The problem with headlines is twofold. Many investors don't read anything but the headline. But also: Headlines are catchy. Even when a savvy investor reads well past the headline, the glittering lure of a short, catchy phrase often becomes the touchstone in his mind.
Marek Fuchs
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