Mainstream Media: Don't Bother Unless You Enjoy Losing

Emotion is primarily about nothing, and much of it remains about nothing to the end.

George Santayana

The Mainstream Media Mirage: A Closer Look

Updated July 2023

We will elucidate the devious and nefarious nature of mainstream media by drawing upon historical and contemporary references. Our rationale for referencing history is twofold: first, it provides a real-time account of past actions, and second, it underscores the vital lesson that failure to learn from history often leads to its repetition.

With its constant barrage of information, the mainstream media often creates a mirage that can mislead investors. The illusion of knowledge and understanding can be dangerous, especially when it comes to making investment decisions. The media’s focus on sensationalism and breaking news often overshadows the importance of in-depth analysis and understanding of market trends.

The mainstream media’s role in shaping public opinion cannot be underestimated. However, when it comes to investing, this influence can be detrimental. The media’s tendency to focus on short-term events and sensational stories often leads to an overemphasis on temporary market fluctuations. This can cause investors to make impulsive decisions based on the latest headlines rather than long-term trends and fundamentals.

The Noise Factor: Amplified

The advent of social media amplifies the mainstream media’s noise factor. The constant stream of news, opinions, and speculations on platforms like Twitter, Facebook, and Reddit can create a cacophony of information that can be overwhelming for investors. This noise can drown out the essential signals investors need to make informed decisions.

The mainstream media’s role in this noise amplification is significant. Focusing on sensational stories and breaking news contributes to information overload that can lead to poor investment decisions. This is not to say that all information from mainstream media is irrelevant or unhelpful. However, the challenge lies in discerning the valuable information from the noise.

The Erosion of Fundamental Analysis

The mainstream media’s focus on sensationalism and breaking news has also contributed to the erosion of fundamental analysis in investment decision-making. Fundamental analysis involves evaluating a company’s financial health, industry position, and market trends to make investment decisions. However, the media’s emphasis on short-term events and sensational stories often overshadows the importance of this analysis.

This erosion of fundamental analysis can lead to a distorted view of a company’s true value. Investors may be swayed by the latest headlines rather than the company’s financial health and market position. This can result in poor investment decisions and potential losses.

The Underperformance of Hedge Funds: A Symptom of the Problem

The underperformance of many hedge funds may be a symptom of the problem created by the mainstream media’s influence on investment decisions. The media’s focus on short-term events and sensational stories can lead to impulsive decisions and a disregard for fundamental analysis. This can result in poor investment performance and potential losses.

While the mainstream media plays a crucial role in disseminating information, its influence on investment decisions can be detrimental. Investors need to be aware of the media’s potential to amplify the noise factor and erode the importance of fundamental analysis. By focusing on long-term trends and fundamentals, investors can make informed decisions and potentially avoid the pitfalls of the mainstream media’s influence.

Mainstream Media: A Recipe for Losing, Don’t Follow

The story below illustrates how both the general public and, by default, money managers, who are part of the broader crowd mindset, tend to lose money when they act upon gossip that is disguised as news disseminated by mainstream media.

However, like many other hedge fund managers, Dillard’s returns could not match the growth of the post-Great Recession bull market. As a result, investors started withdrawing their investments. In February, when the assets under management dropped below $500 million, Dillard shut down the fund. In a letter addressed to clients, he and his partner, Raj Venkatesan, expressed their realization that sometimes, even a successful venture must come to a logical conclusion. Full Story

Money managers ( and other financial experts) are no different from the average Joe; they place too much value on useless information.

In the past, hedge fund tycoons operated their firms akin to exclusive private clubs, carefully selecting who could enter and determining the price for access to their highly lucrative performance. However, years of underwhelming results have prompted several funds to consider a more inclusive approach resembling that of a general admission policy.

At the recent SkyBridge Alternatives (SALT) hedge fund conference in Las Vegas, Roslyn Zhang, a managing director at China Investment Corporation, China’s sovereign wealth fund, highlighted the prevalent herd mentality among hedge funds. She observed how some funds spend a mere “two seconds” deliberating on a particular concept before committing investor funds to the idea. Zhang further remarked, “We pay 2 and 20 for treatment like this. I am pondering whether we are making the right decisions.” Her statements reflect a growing sentiment that the current approach may not be yielding optimal outcomes. Full Story

Transforming Hedge Funds: The Shift Towards Inclusivity in Mainstream Media

In the past, hedge fund tycoons operated their firms in a manner reminiscent of exclusive private clubs. They meticulously selected who could gain entry and determined the price for access to their immensely profitable performances. However, a string of lacklustre results has prompted several funds to contemplate a more inclusive approach that mirrors a general admission policy.

At the recent SkyBridge Alternatives (SALT) hedge fund conference held in Las Vegas, Roslyn Zhang, a managing director at China Investment Corporation, China’s sovereign wealth fund, shed light on the prevailing herd mentality among hedge funds. She astutely observed how some funds dedicated a mere “two seconds” to deliberate on a particular concept before committing investor funds to the idea. Zhang further remarked, “We pay 2 and 20 for treatment like this. I am pondering whether we are making the right decisions.” Her statements resonate with the growing sentiment that the current approach may not yield optimal outcomes in mainstream media. Full Story

Mainstream Media: Hedge Funds’ Rollercoaster Ride Through NFLX and AAPL

If hedge funds performed poorly in 2015, the outlook for 2016 appeared even bleaker, and 2017 was poised to be potentially devastating for many large funds. Most money managers exhibited a reckless attitude, lacked substantial knowledge, and followed the crowd. This herd mentality led numerous funds to abandon their positions in NFLX and AAPL, even when a more prudent strategy would have been to buy rather than sell. Consequently, much like the general population, they sold when it was the opportune time to buy and bought when it was the right moment to sell.

According to a recent report, the world’s most prominent hedge funds significantly reduced their holdings in Netflix and Apple during the second quarter, more aggressively than any other portfolio stocks.

According to an analysis of regulatory disclosures by FactSet, the 50 most significant hedge funds executed significant divestments in the second quarter. They offloaded approximately $2 billion worth of Netflix shares and another $1.8 billion in Apple stock. This substantial manoeuvre by the hedge funds signifies a strategic pivot in their investment portfolios from April to June. Full Story

Mainstream Media Distortion: A Look Back at Market Behavior

In August 2015, Mass Media declared that the markets were on the verge of a crash. They painted a bleak picture, suggesting the world was heading for a catastrophic financial collapse. However, contrary to these sensationalized reports, the markets didn’t crash but found their footing.

Similarly, in January and February of 2016, Mass Media again sounded the alarm, stoking fear and panic. Yet, just like the previous instance, the markets didn’t follow suit; they soared higher instead of crashing. Rather than seizing the opportunity to buy during the pullback, the media continued to view it through the lens of fear.

On both occasions, we maintained that sharp corrections should be seen with a bullish perspective. It’s essential to recognize that fear sells, and the media often magnifies minor issues into major crises.

Mastering Market Volatility: Lessons from Key Events

Britain’s recent decision to exit the EU sent shockwaves through the global landscape, unleashing turmoil and uncertainty. It prompted the resignation of Prime Minister David Cameron and resulted in a staggering loss of over $2 trillion in international markets.

Similarly, the media’s penchant for sowing panic has been repeatedly debunked. Upon reflection, it becomes evident that after the initial panic subsides, the world continues its course, undeterred.

Numerous comparable events could be cited, and in each instance, the outcome remains constant: those who succumb to panic often suffer losses, while those who maintain composure stand to reap substantial rewards.

It’s crucial to regard any alarming event as an opportunity as long as fiat money remains in circulation. In today’s world, noise abounds, making it challenging to gain a clear perspective amid the din. To discern the underlying patterns, one must adopt an objective stance. Emotional entanglement with events hinders logical thinking and wise decision-making.

Originally published on September 7, 2016, and continuously updated over the years, with the latest update completed in July 2023.

Each of us makes his own weather and determines the colour of the skies in the emotional universe which he inhabits.

Bishop Fulton J. Sheen

Mainstream Media: Don’t Bother Unless You Enjoy Losing