Do you feel overwhelmed by the amount of news for every investment option? Have you ever wondered why the same stock can be viewed as good and bad news depending on who is speaking for it? Even more puzzling, you might even find the same person has opposite point of views depending on when and where he or she speaks for it. It all seems so complicated that you don’t know how to evaluate or read those news.
I recently read an article on yahoo finance where Jeff Gundlach, who manages $120 billion asset talked about his point of view on reading market news. His first comment caught my attention : “I look at news wires more than anything else, and I try very hard to pay no attention to what other people think.”
This is exactly the same attitude I have held in my own investment experience and thanks for Jeff Gundlach to make it loud and show that it can work.
One of examples I have told many of my friends, if you look back to what happened to news in 2016 right after Donald Trump won the election, you would find dominant news as to how market will crash and it is time to get out of market. Interestingly, if you paid closer attention to those news, you would found that they regularly rotated out of some well known asset management companies. So how do you judge on those news?
The principal is to check on the news flow. Very often you will find that the news did not deliver new facts, rather it was more of interpretations of the news changing from one direction to another. In another word, it is not a news, just an opinion change by the same resource to serve its individual purpose at different times.
Opinion does matter to some extend because there will always some population believe in certain people’s opinion religiously. This will create a temporary dislocation in the markets, which leaves some investors to be able to benefit from it. If you are a short term trader who is in and market frequently, this is a great opportunity for you to take advantage.
For a mid-long term investor like me, I look at the fundamental factors to be considered in “changed opinions”. Very often I found that it is much better off to ignore those point of views. This goes to my believe of “simple wealth”. When the opinion shifts without factual supports, it creates a window of timing that you could buy into market at a discounted price. For example, I have another blog talking about IQIYI, that is at low pricing due to China-US tariff discussion, however, IQIYI is a Chinese content media company that does not subject to tariff impacts, so the news distortion on overall Chinese stocks pushed down the price of IQIYI, which also generated a window of timing for your investment.
Back to the example in 2016, market did not revert to a bear market despite of some short term swings. About 5 months after the election, there was some news that showed that some of “bearish” news creators have lost significant amount of money because of the short position that they already held before election. So we know the opinions were published for a reason, however, because there was not any unemployment or other data suggest market is in bear market, it did not hold and truth won at the end.