Media recipe for throwing investors off balance
When governments announce bailout plans or anything else, the media coverage is pretty much guaranteed to contain a quote from someone to say that they did not go far enough and someone else to say that they went too far.
This is the media concept of 'balance' in action. The idea of balance is that it enables newspapers and TV stations to avoid the suggestion of bias, that they are favouring one or other point of view. The goal is to present 'both sides of the story' and if there are no two sides to the story, to invent them.
The added bonus of this approach is that it also makes everything seem a lot more interesting than it is. Whatever the issue, watching people argue on TV is more entertaining than watching people agree with each other.
In the finance context, however, this is really annoying. And I have gathered quite a lot of data on this by spending far too many late nights watching business channels. Although I do this in the hope that I will learn enough about what the experts think I must do with my portfolio, thanks to 'balance', the result is always the same.
First a smart-looking man with grey hair and glasses will be interviewed by the plucky young anchor and will say something that seems sensible like: valuations are at a point that we haven't seen in 150 years. At this point I will think that I really ought to be buying shares and start to worry that perhaps it is already too late.
Then another analyst, who looks and sounds pretty much like the last guy, will appear. And he will say: the underlying economies where these companies do business are weaker than we have seen in decades and earnings are only going to worsen. I will then start to get nervous about the stocks I hold and resolve to call my broker first thing in the morning to sell before it is too late.
Then five minutes later someone else will come up with something completely different. And this will go on and on until I eventually fall asleep on the couch and wake up vowing never to waste another evening watching business channels.
There are no two sides to the story when it comes to stock or any other markets. There are hundreds of sides. For practically any opinion you can imagine, there is an analyst out there who is ready to pitch it on television. And these analysts get paid to do this, so whatever they say it's going to sound pretty convincing, at least until the next guy comes on.
The reason for this phenomenon is that either the issue is so complex that it cannot be thoroughly analysed in a two-minute television interview by even the brightest financial minds out there, or alternatively no one really has a clue. And by the way, that last sentence is an example of media balance that I doubt you'll see again in the business media any time soon.
And just as there can be more than two sides to every story, there can also be less than two. The problem is that even where there is really only one side to a story, journalists often feel the need to come up with the other side. A perfect example of this is the made-up debate about creationism or 'creation science', just about the greatest oxymoron ever invented.
Creationism is a concept that appears in most religions to explain the existence of trees, mosquitoes, tape worms and every other living thing on the planet. Oh, and the planet itself. And the sun. And so on. In a nutshell, the explanation for these things given in the standard creationist accounts is 'God did it'.
The made-up debate is whether or not 'God did it' ought to form part of the biology syllabus in high schools. Obviously no one really thinks that this long-abandoned medieval explanation for natural phenomena has any place beside the massive volume of actual science in a science class. But thanks to 'balanced' reporting, you could be forgiven for thinking that there is a real debate on the question.
The journalists writing on the topic demonstrate balance by putting the opinions of eminent biologists alongside those of religious fundamentalists who happily ignore scientific evidence. So even though the issue of how life evolved on Earth is as settled as why apples fall downwards and how germs cause disease, we end up with a balanced story that also includes the views of someone who thinks that the Earth is 6,000 years old.
And although 'crazy people want to teach religion in science class' is a pretty enticing headline, it doesn't sound like a real news story. 'The debate between evolution and creationism rages on' seems so much more legitimate and is far more likely to get published.
Having said that, I would like to see a creationist account of the stock market with appropriate balance. I imagine that there are plenty of people out there who would happily argue that it was created by God, but I'll be cheering for the other side with the far more likely alternative theory: 'The devil did it.'
Contact Alan Alanson at firstname.lastname@example.org