Saturday, 16 March 2019

Why Investors Should Beware of the Media

Analysts and investors pride themselves in being genuine about their thinking and research. But that’s not always the case. At a subconscious level, they are not just influenced but driven by the media. Many of them will shake their heads on reading this, but as I said, it happens at the subconscious level, so you don’t know that you are being controlled.

The media feeds on our fears, anxieties and the tendency to pay attention to what’s abnormal. That’s why it seldom reports what’s normal. If it’s normal, nobody wants to hear it. That’s why, there is so much importance given to “breaking news” or being the first to break a story. The recent Union Budget again saw the media trying to outguess the budget provisions. When a couple of them proved to be right, the media patted itself on the back. With the general election scheduled in a month, the media is again try to predict the future.    

What’s the need for all this? Why can’t we wait for the event to conclude and wait for the outcome? The media then can do the reporting. But then there will be no thrill, perhaps. 

The latest news flow in a couple of stocks is another example of how the media controls the narrative. A leading housing-finance company is the latest prey of media monsters. Nothing that has been said against the company has been proved yet, but the effect is visible in the company’s stock price. Analysts are falling over themselves to find problems with the company. The same analysts were earlier recommending the stock on TV.

The real problem is not the unfettered criticism by the media. To some extent, it’s essential to ensure transparency and check corruption. The problem is that this rebuke can cascade into reality. The same housing-finance company has seen its bonds downgraded and its stock dumped by institutions. After all, who wants to take the risk? This itself can cause substantial damage to the business and shareholders.

What’s the solution then? Take the media to task. It shouldn’t be allowed to escape after making false allegations that result in loss of money or reputation. The media company should be made to pay the damages if its report turns out to be wrong. This will also make the media more accountable. 

It doesn’t take much to malign a company or an entrepreneur; any idiot can do that. But it does take a lot of effort and years of toil to build a company, on which many people depend for their livelihood.

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