Yelling at the Television

David Kennon Kennon Financial

Family Update:  My son Chris turns 9 this week.  I have four kids and he is my oldest son.  In the past month he has gotten obsessed with football.  He is collecting NFL trading cards and is always cheering on Daddy’s favorite teams.  As a Steeler fan, born and raised in Pittsburgh, having a life-long football buddy is priceless.  I am a very lucky guy. 

Dave’s Rant for the Week

In my house I am infamous for yelling at the TV (or radio or computer).  Whenever I see irresponsible financial reporting in drives me bonkers- and I found a couple examples this week that really got me annoyed.  

The first article comes from MarketWatch, which is a large, relatively mainstream organization.  The title reads: 

“Five Charts That Say All Is Not Well in Markets” (link) 

Now, I want to be clear, I don’t know whether or not the markets are going to go up or down in the near-term.   But neither do they– no matter how many scary charts they have.

If you read the article, you will find them referring often to the “VIX.”  The VIX stands for Chicago Board Options Exchange Volatility Index.   Academic research has not shown the VIX to be predictive on which way the stock market is going to go.  There is no correlation.   When the VIX is high, sometimes the markets go up and sometimes they go down. 

You may ask yourself, “Well if this article is based on….well….nothing.  Why did they write it?”  You probably already know the answer.  It’s all about the money!  They are trying to get more people to go to their website.  If more people read their articles, their advertising revenue increases. 

Now, I don’t want to only pick on the doomsday crowd.  How about this article:

“After four years of declining revenue, Caterpillar is due for a rebound” (link)

Positive articles about the markets are much harder to find than negative ones.  Why?  Because they don’t get your attention as effectively.  Look at the local news!  90% bad news, right. 

But just because the article is positive, doesn’t mean it is true.  It you actually read the article, you will find that some Very Smart analyst has an opinion.   Unfortunately, there is no evidence that anyone’s opinion is consistently right enough to help you make more money. 

My advice to you:  Ignore this stuff, and then bask in the knowledge that a diversified portfolio of stocks and bonds, with a long term perspective, is a remarkably consistent and powerful tool. 

 Be Blessed,

Dave

 The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings.

The value of fixed-income securities may be affected by changing interest rates and changes in credit ratings of the securities.

 Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Indexes are unmanaged portfolios and individuals cannot invest directly in an index.  Actual results will vary.

This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.