At long last, the media is trying to give up its excessively negative ways, with predictions of a good year on the stock market becoming the subject of front-page headlines on no less than the Fin Review.
Of course, regular readers of the Switzer Super Report know we were arguing this all through 2012. And long-term followers of the Switzer program on the Sky News Business channel and www.switzer.com.au would recall I’ve been supporting stocks since early 2009.
So given the lateness of august publications to give reliable guidance to investors, the question is: should we wear ear muffs to block out the negative noise of media outlets?
Recently, I was lamenting the preoccupation of news services on the negative and my colleague at Sky News, Michael Willisee, reminded me: “If it bleeds it leads, Switz.”
That sums up the rationale for news outlets but does this help investors trying to build wealth? And as a consequence should investors avoid the bi-products of negative news peddlers?
The simple answer is no! However, it’s crucial for successful investors to siphon through the offerings and never forget what their investment strategy is.
Sure, the general media spin last year was “watch out — a left-field event is on the cards” with Spain, Greece and Italy worrying bond markets, while others made us panic about a hard landing for China. And then there was the fiscal farce, courtesy of the US Congress, but there can be pay offs in filtering news.
For example, when BHP and Rio hit lows, that news encouraged me to go long these stocks because my long-term investment strategy told me that I want to be holding these stocks in two or three years time, when the worst of this GFC mess is behind us. The fact I pocketed an early bonus was just a nice down payment on future streams of income.
News tells us when a CEO is under pressure, a new one is appointed, Internet sales are bigger than expected and some positive or crazy political decision is on the way. All of these can affect our opinions of a company and therefore how we invest.
Right now the media is telling us, albeit a little too late, that:
- China’s trade and inflation data confirms a stronger economy than doomsday merchants were predicting.
- The US economy is on the mend, with housing and manufacturing data getting better by the month.
- Warren Buffett says the US banking system is “in the best shape in recent memory”.
- Mario Draghi held back a rate cut for the EU and that he expected a “positive contagion” was on the way.
I could go on, but you’ll get this sort of thing in coming weeks, I’m sure, from yours truly.
Last year, I argued that we need a snowball of confidence to build and Draghi has talked about the same thing with his “positive contagion”.
As interest rates fall and better news prevails — there’s the function of news outlets again — defensive investors will switch to stocks. Our S&P/ASX 200 should crack the 5000-level and stay above this psychologically important mark — it should be third time lucky, after failing in 2010 and 2011.
Of course, there’ll be dramas to worry us and the news services will bring these to us but I see these as buying opportunities. And, one day, the news will give us reasons to sell out and go to cash — let’s hope they see this earlier than usual, but I guess this is my job!
One interesting piece of news over the weekend I spotted was the stock markets of Italy, Spain and Portugal are up 6% this year already! This suggests a lot of other Europeans agree with Mario Draghi that 2013 will be the year of the positive contagion.
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Also in the Switzer Super Report:
- Paul Rickard –
- Rudi Filapek-Vandyck – The broker wrap: 32 changes in individual stocks
- Tony Negline – Clause and effect: important, but controversial parts of superannuation