Log In

Reset Password
BERMUDA | RSS PODCAST

Do your best to kick the click-bait habit

What if you saw a headline that said that a brilliant billionaire investor, whose every move is closely watched, had put on a trade that wasn't widely known — and if it were, it might rumble through the markets?

Would you click on that link?

Now what if you were told that the media reported this same trade by this same investor for five years running, and mentioned that there was no proof it was true — and that even if it was true, the bet seemed to be wrong and had had no impact on markets? I assume you would skip that post, right?

Let's call it adventures in confirmation bias.

The scenario above describes just how overhyped and misleading headlines have become as a staple of web-published market commentary.

I recently was reminded of how many empty news calories many readers consume, courtesy of Michael Harris of Price Action Lab Blog. Harris is an engineer and systems developer who has put his graduate engineering degrees to use analysing markets and developing trading systems. His critical thinking about back-testing and data-mining often has proven wonderfully insightful.

Harris highlighted a classic example of the click-bait approach with a simple chart of the Standard & Poor's 500 Index, annotated to show every time a news story reported that George Soros's investment fund was buying puts on the index, or making a bet that the market would fall.

There are some lessons here, including but not limited to:

• Your financial plans, and the investing goals of most people, are very different from those of a billionaire.

• Soros's puts might be a hedge against another and opposite position, meaning that he actually is betting the market will rise — but just in case it doesn't, he's taken out a bit of insurance.

• The information could be old, and not reflective of current positions.

• The writer may have an axe to grind with Soros's politics or ideology.

• Soros's market call could be wrong.

It isn't just Soros who is cited regularly in these kinds of posts and articles. Michael Price and Larry Swedroe do an admirable job of taking down the perennially wrong pundits who cite this random fact or that ad hoc tidbit as empirical support for their views.

We have discussed aspects of this before. In this vein I have pointed out some folks who make the same market call year after year, regardless of what happens in the economy, markets or with corporate profits. Marc Faber's annual prediction of a “1987-like crash” is a perfect example. He did change it up earlier this year, when he said that “asset markets will crash like Titanic”. Despite a seven-year streak of being wrong, he must be awarded points for creativity for that one, substituting events that occurred 104 years ago for those that happened merely 30 years ago.

I don't want to pick on Faber, who is an appealing media personality and makes for great entertainment whenever he speaks about any subject. It's just that entertainment isn't a sound base on which to build your portfolio. Lots of talking heads are much worse, and with more dubious motives.

Why does this annual farce go on? Because it works. Juicy headlines attract clicks, and people who make (and repeat) outrageous claims attract eyeballs and capital.

Why people feel obligated to give their money to these mystics is beyond my understanding, but it is effective, and so it continues.

As a public-service reminder to pundits and click mongers — people may forget, but the internet remains indexed and Google-searchable for a long time.

So please folks, don't encourage this foolishness by giving in to the temptation to click on every salacious, but misleading, headline you see. You will only encourage them.

Dr Doom: Marc Faber is on a seven-year streak of being wrong in predicting an imminent market crash

You must be Registered or to post comment or to vote.

Published May 28, 2016 at 9:00 am (Updated May 28, 2016 at 1:20 am)

Do your best to kick the click-bait habit

What you
Need to
Know
1. For a smooth experience with our commenting system we recommend that you use Internet Explorer 10 or higher, Firefox or Chrome Browsers. Additionally please clear both your browser's cache and cookies - How do I clear my cache and cookies?
2. Please respect the use of this community forum and its users.
3. Any poster that insults, threatens or verbally abuses another member, uses defamatory language, or deliberately disrupts discussions will be banned.
4. Users who violate the Terms of Service or any commenting rules will be banned.
5. Please stay on topic. "Trolling" to incite emotional responses and disrupt conversations will be deleted.
6. To understand further what is and isn't allowed and the actions we may take, please read our Terms of Service
7. To report breaches of the Terms of Service use the flag icon