This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Taking Advantage of Misleading Headlines

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( ETF Expert) --Factual headlines are often misleading.

For example, a popular financial portal offered, "October consumer confidence weakest since March 2009." Most people might interpret this to mean that consumers aren't spending and/or won't be spending their money, resulting in less revenue for economically sensitive corporations.

However, actual consumer spending has been on the rise, 1.1% in September alone.

Equally important, Retail ETFs have reflected the actual spending data as opposed to the "confidence" data. The capital appreciation far surpasses the sector competition as well as the broader S&P 500 benchmark.

Simply put, headlines can wreak havoc on human emotions. Consider the market's late April peak. At that time, headlines tended to downplay Armageddon-like scenarios, while simultaneously talking about hiring as the last piece to the recovery puzzle. Bullish optimism outpaced bearish pessimism by 3 to 1 in the "Advisers Sentiment Survey."

Flash forward to October of 2011. Today you'll see headlines that include Europe's imminent doom as well as China's hard landing/bursting economic bubble. Not surprisingly, the same newsletter survey by Investors Intelligence currently has far more bearish pessimism than bullish optimism.

Indeed, the folks at Investors Intelligence will be the first to tell you that their survey is a "contrarian" indicator. It follows that a contrarian might look at 40% declines in China ETFs and consider some of the more favorable realities.

For instance, China's PMI is rising and inflation is moderating. Moreover, if GDP growth slows more than authorities prefer, they have ample room to loosen monetary policy and/or utilize a portion of vast cash reserves in a large-scale stimulus package. The likely result? ETFs like SPDR S&P China (GXC) with a P/E near 9 would probably skyrocket.

It's not that the mainstream media intends to mislead investors. Yet the more pessimistic we feel, the more negative the headlines; in turn, the relentlesss nature of "bad news" tends to move folks from pessimism to abject fear.

Obviously, not everyone has Buffett-like wiggle room to "buy when others are fearful, sell when others are greedy." The Oracle of Omaha can afford to be wrong.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GXC $67.02 -0.93%
RTH $76.67 -0.18%
XRT $43.46 -1.10%
EWM $8.22 -0.36%
EWA $19.65 -0.91%


Chart of I:DJI
DOW 17,667.98 +16.72 0.09%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs