Why All The Bad News?

By Twickenham Advisors on June 2, 2017

Businessmen can profit handsomely if they will disregard the pessimistic auguries of self-appointed prophets of doom. – J. Paul Getty

 Perhaps you’ve heard of Porter Stansberry’s “End of America” research, Marc Faber’s Gloom Boom & Doom Report, or maybe even ventured to the notorious ZeroHedge.com blog. These and many others have attracted quite the following over the years with emotional, click-bait titles accompanied by shocking predictions like the Pied Piper with his magic instrument.

Aside from the grim, bleak financial newsletter arena, the TV, radio and online media, in general, is usually in a state of panic as well. You would think that our species has no chance of survival the way the pundits portray current events.

Why is everybody so negative all the time? The answer is simple: bad news sells. Nobody wants to watch the good news. The media outlets have spent billions of dollars on research to figure out what you want, and they have discovered that you will tune in, buy the newsletter, and keep your eyes glued to a crisis.

Psychologists call it Negativity Bias. Whether you know it or not, you have a general hunger to hear and remember bad news.

“But Faber was right about 2008,” you might say. Well, a broken watch is right twice a day, too. And was he really right? J.P. Morgan once said, “The man who is a bear on the United States will eventually go broke.” The market did pull back 50% in 2008, but as I pointed out in a previous blog, even if you put all your money in the market on the second worst day in U.S. history, October 9, 2007, you would have still earned almost 7% per year by now.

The fact is that good companies make money. They either reinvest that money in the company or pay out to investors in dividends (or some combination of the two). Sometimes, the economy contracts and companies make less money for a while. Good companies outlast these recessions and continue to make profits afterward. J. Paul Getty said it best, “Owners of sound securities should never panic.”

So, the best approach is to recognize that it pays to ignore the “noise” and pay attention, instead, to the profitability of the companies you own. A financial advisor can help you create a portfolio that you are comfortable with and can stick with through the good and bad times. As Laurence Peter said, “Many an optimist has become rich simply by buying out a pessimist.”