Thursday, December 22, 2016

Fake News, Old News, Wrong News, or Just Plain Old Prices

"99% of the what I read in newspapers is true except for the 1% I have direct knowledge of."

“If you don't read the newspaper, you're uninformed. If you read the newspaper, you're mis-informed.”

― Mark Twain

The world has been abuzz with talk of fake news as if this was a new concept. Fake news has been around as long as newspapers have been printed and before. It has been called gossip, bias, or yellow journalism. Fake news has taken countries to war, ruined reputations, and swindled readers. Like all technological change, it is coming faster and in more forms.

For investors, fake news is something that has to be dealt with everyday. Investors also have to deal with old news. By the time news gets into newspapers, it is usually discounted by the market. What may be left is an interpretation of this news in prices, but not its immediate realization. There is also a problem of wrong news. Data are subject to revisions and much of what is printed are not facts, but the opinions of others. This news can just be wrong. The opinions are not fake, but are not correct. Part of reading multiple papers is to close in on what may be correct. 

So what can investors do in this world of news? Keep it simple, and follow the prices. This is the essence of all price-based systems. Following prices offsets the dark forces of the fake, old, and wrong news read in papers. Prices can be wrong too, but at any point in time it is the immediate weighing of opinions with dollar votes. You can still follow the news and fundamentals provide background and details, but the test of what news is telling us is with its relationship with price. 

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