How Mass Media is Poisoning Your Trades

How Your Trades and Thoughts are Controlled by Mass Media

Poison Bottles Spilling
Spilling Poison Bottles. Vstock LLC

The media is reactive, NOT proactive. When a popular news show discusses an event, they are providing details about what has already happened, not what is actually currently happening (and certainly not what is going to happen).

Most people believe the news is an account of what is going on right now, or that warnings and predictions provided in mainstream media are revealing what is to come. At the same time, those outlets understand very well that they perform best (in terms of financial operations, and total viewership, which just so happen to be tightly linked) when they appear to be telling you "what is happening right now."

Consider Ebola for our example, but I could have just as easily subbed in Occupy Wall Street, the Dot Com Bubble, the missing Malaysian Airliner, Bitcoin, or just about whatever story was grabbing headlines. Turn on your TV right now - you will see events that are recently over being promoted as "breaking news," or "happening now."

With Ebola, people believed that the disease was growing in total cases based on the volume of media mentions and stories about it. The total network coverage and the average person's fears about the prevalence of the disease were linked.

The reality is that the coverage and the facts diverged significantly. We first mentioned ebola on our stock market blog years before the average person had ever heard about it, saying, "you'll soon be hearing a lot more about Ebola." That was when it was spreading rampantly, and that is when it actually was a global threat.

As the disease started to spread, and then was increasingly brought under control, the media jumped on the topic.

They couldn't resist the boost in viewership that they achieved through some men entering planes in hazmat suits,or orphaned sick children kept behind bright orange plastic fences.  

All this, and there were still lots of photos of the results of what the actual disease does to a person. This was a great "Holy Grail" for mass media, and in retrospect, maybe even packed more punch than the endless coverage of the missing Malaysian airliner.

People had no idea how serious the threat was when they didn't know about it. By the time they (you) were inundated by constant alarmist coverage, people got pretty scared, but at no point did they expect that the media was actually packaging the threat, the stories, and the trend in the illness to their best benefit.

Ebola was a risk before you heard about it. Ebola was under control by the time you heard about it. 

However, it was only once the media put the stories in front of the masses that they took action. Therein lies the angle, or your advantage, which comes from seeing the impact of mass media.

Think about how people reacted to the story:

  • stopped buying plane tickets
  • sold cruise line and airline stocks
  • purchased home gas mask and survival kits
  • cancelled vacations
  • looked sideways at anyone who coughed in public

In this sense, the media actually drives the masses to make trading decisions (or even lifestyle choices) based on trailing information. If you are aware of the impact the mass media is having upon the people around you, then spotting the opportunities becomes natural and simple.

Let the media play out their fear, then take your action at the height of the coverage. To close out our example above, you would have:

  • got great deals on airline fares
  • bought cruise line and airline stocks at bargain-basement valuations
  • saved your money on survival supplies and gas masks
  • planned your vacation
  • been less fearful in public