Sophocles famously wrote, “No one loves the messenger who brings bad news.” But what if the messenger isn’t telling the truth? What if he or she is exaggerating, or extracting parts of the truth and mixing it with outright lies and distortions to give an entirely different meaning to the message?
Maybe we should kill the messenger sometimes—at least metaphorically.
One of the most important questions I ask when I receive information that sounds a little shocking or unexpected is, “Why are you telling me this?”
For example, during the 2020 presidential campaign, then President Trump warned that if Biden were elected, we would have a recession like you’ve never seen. Of course, it’s too early to know if that prediction will pan out, but I think it’s safe to say that it was not based on any economic indicators.
The “Why are you telling me this?” test, when applied to Mr. Trump’s statement, is very clear. He told us that because he wanted to scare voters into casting their ballots for him.
In other words, maybe politicians aren’t the best source for economic forecasts.
When I watch the portfolio manager of a bond mutual fund on TV say that the stock market is terribly overpriced and horribly risky right now, it’s clear that the motivation is to get me to invest in bonds, and hopefully in their particular bond fund.
When an equity fund manager says on TV that certain stocks are wonderful now—so wonderful in fact that those stocks are already in their fund—that manager is doing what is called talking up their position. The companies mentioned may actually be good investments, or it may be that the manager wants you to buy and push the stocks higher, so they can sell at a higher price.
Does this mean that every talking head or blog writer is lying or hopelessly biased? No, not at all. But many are, and it’s important to separate those analysts trying to do an honest job from those trying to do a snow job.
And here things can get a bit complicated, because our biases play a big role in who and what we choose to believe. Maybe the most insidious bias of all is confirmation bias. If someone says something that emotionally resonates with what we believe, our tendency is to accept it without much thought. Of course it’s right, because it agrees with what we think.
This can be dangerous because it further cements our bias, and we don’t bother to check into it. We simply assume it is correct.
I am intimately familiar with the danger of confirmation bias, and even though I am alert to it, I still manage to fall for it sometimes. It’s that insidious. We all need to be on guard.
And while we’re on the subject of checking information, it’s also important to be aware of commonly used subjective terms like big, large, and small. They’re all relative. For example, sometimes a prospective investor will ask if we accept small accounts. But my understanding of what constitutes a small account might be entirely different than his.
Here’s a real-life example. I was having an after-game drink with some clients at a Los Angeles golf club. One of the clients said something about club members who had a net worth of only $10 million, and this was accompanied by a hand gesture that mimicked sweeping crumbs off a table. So I stopped him and asked if he meant that people with a net worth of $10 million were so much riffraff. “Well, Hal,” he replied, “you have to understand that at this club, members look down their noses on anyone with a net worth of less than $20 million.”
The point is, if you want to really understand what’s going on, ask questions. Get clear on the speaker’s exact meaning before accepting it outright. Politicians are not the best source of economic information. They don’t have the expertise. Their expertise is in telling people what they want to hear. That’s far from an accurate source of information.
You wouldn’t normally ask your doctor how to fix your car, or your mechanic how to cure a medical condition. You want to get your financial information from financial professionals and your economic information from actual economists.
Be wary of vague, subjective statements, no matter the source. Words like large, a lot, small, and risky are all imprecise terms that convey what a person thinks, but not what they mean.
Hal Masover is a Chartered Retirement Planning Counselor and a registered representative. His firm, Investment Insights, Inc is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556. Securities offered through, Cambridge Investment Research, Inc, a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights, Inc & Cambridge are not affiliated. Comments and questions can be sent to hal.masover@emailsri .com. These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results.
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