Is It Information...Or Is It Noise?

After being in the investment business for close to two decades, my ears tend to perk up when I hear conversations pertaining to the market. While out at Sunday breakfast last week, I was witness to an interesting event. The cook of the restaurant had come out to greet a party a few tables away from us. After the usual friendly greetings, the cook proceeded to give them a ten-minute “seminar” on where he thought the market was going, an analysis of seven individual stocks, and his projections for unemployment and the future direction of the market. In today’s world where we are bombarded by opinions in the newspapers, TV, radio and just about everyone, it is important to clearly differentiate between information and noise. While the commentator on your favorite news program may sound like an endless fountain of information, most of the comments you hear are opinion, or the orator’s personal perspective on the subject. Since we are all entitled to our opinion, there is usually no basis in fact to back up what sounds like their very important outlook. An example of fact, or information, would be a quote on the ten-year treasury, or a press release directly from a public company quoted by the official spokesperson. Once the radio commentator starts to give his or her spin on the announcement, the rest is noise. Did you ever notice how the analyst’s will be positive and give a buy recommendation to a stock when it’s at 400, or a sell when it gets all the way down to 3? How many times do you hear them give the stock at 400 a sell recommendation, or a buy at 3? So, while we continue to be flooded daily with things to see and hear, please be conscious as to what is information, and what is noise. If you are not sure, give us a call. We’ll give you the information.