"Sales of previously owned U.S. homes slipped 0.8 percent in December and took their biggest tumble in 17 years for all of 2006, leaving in doubt whether the worst of a housing slump has passed."Now, you see, they are writing about "doubt" that the housing slump has passed. But besides some journalist looking to run with a few random statistics during the lightest news period of the year, no one in their right minds was saying it had passed. OK, OK -- maybe some local realtors looking to pawn off inventory on the gullible, but you get the point, right? You need profits, but they need copy. So they structure a story around a purported recovery. That¿s more of a story than some old, bad number. Then, when contradictory numbers come out, you just write about doubt. But it's doubt in something that few right-minded people believed in the first place. A journalist can ride an idea one way and then the other and emerge ahead. He gets two articles out of it. As an investor, though, you get two losses from the same stunt.
What's Wrong With This Picture?While we are on the subject of making copy, verbs and adjectives are good filler, right? And they are lively and make for fun reading? But the market is volatile enough as it is, and good copy often gives the investor the mistaken impression that things are more volatile than they really are. Look at this typical effort from the Associated Press, brought my way by reader Mark Solomon from Roswell, Ga., who gets as emotional about this stuff as I do:
"NEW YORK (AP) -- Stocks skidded lower Monday as growing concerns over technology companies led jittery investors to pull money out of the market. The Dow Jones industrials fell 100 points ... The steep decline continued the market's recent erratic trading pattern¿"This is like one of those kid's puzzle games. Can you find five mistakes in this picture? Five things that, read uncritically, can confuse investors and prevent them from making money? Well, how about 100 points being written about like it's a lot. That was fine a generation or two ago, but now, with the market over 12,000? One hundred points is a rounding error. Skidded? It¿s a blip on the base of 12,000. Investors are "jittery" when the market goes down a fraction of one percent? Even use of the term "investors" is broad enough to be farcical. Do investors "pull money out of the market?" And if so, how does AP know? Dudes, it's traders who go in and out of stocks on a daily basis, and even they aren't really pulling their money out of the market. They are bouncing between tech and some other flavor of the day. So what's the upshot of all of this for you? Well, if you are smart about it, when you see journalists making obvious efforts to fill copy instead of reflect reality, you can make money by trading the spread. Reality always catches up to trumped-up story lines, which are created to have something exciting to say. People seem scared off by what they are reading about a volatile market. Realize how it is really much steadier than they say. Are journalists strapped for stories declaring a premature end to the bear market in housing? Short some housing stocks to take advantage of those land charges sure to come. You'll be getting paid to read.