Mass Media Examples of Stupidity: Astounding Blunders

Have patience. All things are difficult before they become easy.
Saadi

Updated June30, 2024

For the past few months, we continued to Google the Terms, Dow 19K, Dow 20K and Dow 21K. We got the most hits on the search term Dow 20,000, but the noise was not enough for us to take these developments too seriously. However, when we noticed that CNBC published two similar articles within 30 days, it was time to take note.

It is a known fact that when sites such as CNBC take a stance, your best bet is to take an opposing position or move to the sidelines. Too many sites are calling for a Dow 20,000, and the Dow has not even traded past 19,000, which means that the markets are more likely to head lower than higher.

All top sites, like Barons, moneypress.com, Cnn.com, etc., have an uncanny knack for being in the wrong camp at precisely the right time. The chatter calling for Dow 20 0000 has hit a level that is too much for us to ignore.

Mass Media Examples of Providing the Wrong Info At The Right Time

Dow 20,000 is coming this year, and here’s why: Strategist CNBC July 16, 2016

Dow 20,000? Don’t laugh. Bulls are alive and well Money.CNN Jul 15, 2016

Dow To Hit 20,000? ETFs To Play Yahoo Finance July 18, 2016

Is Dow hitting 20,000 soon? Wall Street says it will happen CNBC Aug 6, 2016

Wall Street’s New Target: Dow 20000 Wall Street Journal Aug 10, 2016

The Dow at 20,000 in a year is now the consensus forecast. Market watch Aug11, 2016

Dow 20,000 in 2017? Maybe Kiplinger Aug 16, 2016

The Dow Could Reach 19,000 or Even 20,000 The Street Aug 18, 2016

In a very recent article, titled crude oil bottom likely to propel Dow higher we made the following comment

The consolidation in oil appears to be over and given their relationship, the Dow together with Crude oil could be gearing up to trade to new highs. Ideally, (but it is not necessary) the Dow would test the 17,800-18,000 ranges before making a break for 19,000.

Historical Mass Media Blunders in Investing

The South Sea Bubble (1720)

The South Sea Bubble of 1720 is one of the earliest examples of mass media fueling financial hysteria. During this period, newspapers and pamphlets promoted the South Sea Company’s stock significantly, contributing to its rapid rise and eventual crash. The media’s uncritical reporting and promotion of the company’s prospects led many investors, including Sir Isaac Newton, to suffer significant losses.

The Dot-com Bubble (Late 1990s)

Fast-forwarding to more recent times, the dot-com bubble of the late 1990s provides another stark example of media-fueled investment mania. During this period, many financial news outlets and publications enthusiastically promoted internet-based companies with little regard for their fundamentals or profitability. This uncritical coverage contributed to the rapid inflation of tech stock prices and the subsequent market crash in 2000.

Modern Media Missteps in Financial Reporting

The 2008 Financial Crisis

Leading up to the 2008 financial crisis, many mainstream media outlets failed to adequately warn the public about the risks in the housing and financial markets. Instead, they often echoed the optimistic sentiments of Wall Street, downplaying concerns about subprime mortgages and complex financial instruments. This lack of critical reporting may have contributed to the public’s unpreparedness for the ensuing economic downturn.

Social Media and Meme Stocks (2021)

Social media platforms have emerged as influential forces in financial markets in recent years. The GameStop short squeeze of 2021 demonstrated how online communities could drive significant market movements. While not traditional mass media, these platforms showed how rapidly information (and misinformation) could spread, leading to volatile price swings and potentially risky investment decisions for inexperienced investors.

When Mass Media tells you it is time to buy, Be wary

This surge in bullish sentiment might provide the necessary impetus for the markets to let out some steam before attempting to trade to and past 19,000.

When mainstream media starts to jump on the bandwagon, we start to get nervous, and so it is more likely that the Dow will test the 17,800- 18,000 range before surging to 20,000. This zone represents former resistance that has turned into support, as indicated in the chart above.

Popular media outlets are just too bullish and turning bullish after the market has surged to new highs; from a contrarian perspective, this is a negative development. The trend in all the indices is up, so the longer-term outlook is still bullish. Forget Dow 20,000 for now; the Dow is more likely to trade lower than surging to new highs.

Mas Medias Reaction to the Coronavirus April 2020 Update

This hysteria-based sell-off is producing one of the most significant buying opportunities in decades; more on that later.

In the short term, technical analysis cannot identify support levels because we are dealing with madness, and that is the reason we added the new level to the anxiety index. What exacerbates the situation is that there is very little liquidity. Look at the bid and ask price on some options; they are unreal, for example, a bid of 1.40 and an ask of 5.00. This allows a few big players to move the markets in whatever direction they see fit.

In the short term, technical analysis cannot identify support levels because we are dealing with madness, and that is the reason we added the new standard in the anxiety index. Very little liquidity exacerbates the situation; look at the bid and ask price on some unreal options, for example, a bid of 1.40 and an ask of 5.00. This allows a few big players to move the markets in whatever direction they see fit.

Mass Media is fuelling the hysteria, so the time to buy is now. Buy when there is blood on the streets and sell when the media pushes the “its time to buy now story.”

Conclusion

The history of financial markets is replete with examples of mass media’s influence on investor behaviour and market outcomes. From the South Sea Bubble to modern-day meme stocks, media coverage has often amplified bullish and bearish sentiments, sometimes at the expense of balanced, critical analysis.

As investors, it’s crucial to approach media reports with a discerning eye, recognizing that financial journalism can sometimes lag behind market realities or contribute to speculative frenzies. The examples discussed in this article underscore the importance of diversifying information sources, conducting independent research, and maintaining a healthy scepticism towards overly optimistic or pessimistic market narratives.

While media coverage can provide valuable insights, it should be just one component of a well-rounded investment strategy. By understanding the historical patterns of media influence on markets, investors can better navigate the often-turbulent waters of financial decision-making in an information-rich age.

Consider the hour-glass; there is nothing to be accomplished by rattling or shaking; you have to wait patiently until the sand, grain by grain, has run from one funnel into the other.
John Christian Morgenstern