When I first became an investment advisor almost fifteen years ago, I thought it was cool to have a television in my office tuned into CNBC. I thought it would impress clients and improve my investment acumen.
Well the truth of the matter is it hurt my investment decision making. That is right it hurt my decision making!
Truth be told, CNBC is nothing but a rumor mill attempting to generate higher ratings by broadcasting the latest rumor or idea 24/7.
In fact, much of the breaking news that they broadcast is already factored into the market. The guest’s they continually trudge out usually have a sell side bias (that is they want to sell you more stocks, funds or products).
If they tell you that China is hot. Use this as a contrarian call and start looking for China stocks to fall (not always, but many times).
I don’t mean to total discount CNBC, but in a 24 hour trading day there is only so much information that is useful and helpful to an investor. Their challenge is to fill up the rest of the day. The investor’s challenge then becomes trying to decipher which information is useful and which is not.
I recently relocated my offices and I decided to not even put a television in my office. I do monitor www.cnbc.com for breaking news, but purely to get a better feel of the investment news of the day that may be driving trading. Even this is a stretch as much of the trading that goes on has nothing to do with news, it has everything to do with liquidity and where market makers want to push the markets to generate greater order flow.
This is why trend following is such a great discipline. Instead of being impacted by the latest rumor or hot tip, trend following models root through all the noise and focus on the price trend only. Is it up or is it down? It is that simple!
So if you really want to improve your investment outcomes, my suggestion is you get yourself a basic book on technical analysis (or trend following) and learn about charting and some basic stock indicators. This will help you every bit as much as CNBC. You might also consider a free trial to www.Stock-Signal.com!
So what has been your experience with following CNBC’s lead on stock ideas? How many of you have followed one of Jim Cramer’s hot stock ideas, just to lose money? Let me know your stories.