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Are You Addicted to Financial Pornography?

By Brad Shorr | March 17, 2008

word-sell-nude-businesswoman.JPGIf you follow the financial news in the mainstream media, you’re probably suffering from a three-month long (and counting) panic attack. Here’s an excerpt from an AP headline story published on March 13, 2008 -

Retail Sales Plunge by 0.6 Percent

WASHINGTON (AP) - Consumers, battered by plunging home prices and a credit crunch, stayed away from the malls in February, pushing retail sales down by a larger-than-expected amount. It was another worrisome sign that the country could be falling into a recession.

The Commerce Department reported Thursday that retail sales fell by 0.6 percent last month, far worse than the small 0.2 percent increase that analysts had been expecting.

The weakness was widespread with sales of autos, furniture and appliances all down.

It marked the second time in the past three months that retail sales have taken a tumble. Sales had fallen by an even bigger 0.7 percent in December, the largest drop in six months, as the nation’s retailers suffered through a dismal holiday shopping season. Sales posted a modest 0.4 percent gain in January.

There’s nothing remarkable about this article - typical of what we read and hear. But do you even notice all the emotional, unsettling words packed into the excerpt?

PLUNGE
BATTERED
CRUNCH
WORRISOME
FAR WORSE
WEAKNESS
TUMBLE
SUFFERED
DISMAL

Read any 10 business articles and you’ll find the same excessive, melodramatic subtext in nine of them. Take the phrase, “far worse than the small 0.2 percent increase that analysts had been expecting.” Are we to blithely assume all analysts think alike? The fact is, analysts differ and differ widely in their expectations and interpretation of data. But financial writers no longer seem interested in dutifully reporting the news. Instead, they titillate us by dressing up the facts in a silky sheet of provocative opinions. A financial adviser friend of mine refers to this phenomenon as “financial pornography.”

Why does the media tease and tantalize rather than inform? Because the media is interested in selling advertisements and subscriptions, not educating the public. And we eat it up like candy. After all, which story are you more likely to read?

RETAIL SALES DECLINE
–or–
RETAIL SALES PLUNGE

Making an extreme case not only sucks us into the story, it makes us hungry for more. What’s going to happen tomorrow? What catastrophe is coming next?word-sell-shocked-woman.jpg

An economy of Biblical proportions?
Thursday’s story of Armageddon and others like it flooded the wires because this latest statistical pronouncement, according to the experts, confirmed that we are “officially” in or virtually in a “recession”. Soon after the story hit, the Dow tumbled over 200 points. However, by the end of the day, the Dow was up about 40. So much for dismal suffering. And keep in mind, just two days earlier, the Dow exploded for a 400 point gain — the largest one day gain in five years! That day, the news was euphoric - the Fed finally gets it! We’ve seen the beginning of the end of the credit crisis! Huzzah!

We’re hurtling down the road on the Media Mood Swing Express, and frankly, it’s making me nauseous.

I’m no economist, but I would contend that the reality is nowhere near as extreme as the rhetoric. For example, take this unemotional report from the Census Bureau on retail sales, also released March 13. Presumably these statistics fed into the stories about the retail plunge.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $380.2 billion, a decrease of 0.6 percent (±0.5%) from the previous month, but 2.6 percent (±0.7%) above February 2007. Total sales for the December 2007 through February 2008 period were up 3.3 percent (±0.5%) from the same period a year ago. The December 2007 to January 2008 percent change was revised from +0.3 percent (±0.5%)* to +0.4 percent (±0.2%).

Retail trade sales were down 0.6 percent (±0.7%)* from January 2008, but were 2.4 percent (±0.8%) above last year. Gasoline station sales were up 20.2 percent (±1.0%) from February 2007 and sales of sporting goods, hobby, book, and music stores were up 6.3 percent (±2.8%) from last year.

Not great news, but does it sound like the sky is falling? Does it sound like a crisis? Only if you mix in some spicy adjectives with the facts. Don’t become a financial porn addict. I can think of three reasons why a crisis mentality is the wrong mentality.

  1. “Recession” is a mere construct. Experts, who spend their lives trying to understand such things, can’t agree on whether or not we’re heading for one, in one, or pulling out of one. No question people feel the pinch in a slowdown, but even in a bad recession (and we’ve had plenty of them), it is possible to thrive. For example, in the current market, U.S. exports are booming, commodities are through the roof, agriculture is hot, and energy is hot. If you’re fortunate enough to work in one of these sectors, the future might look very bright. If you’re smart enough to invest wisely in one or more of these sectors, you have the opportunity to offset some of these insane price increases on gasoline and household items.
  2. Economic data can be sliced and diced six ways from Sunday. The statistical sound bites we get from the media can’t possibly convey the meaning behind them. And again, even when experts understand the statistics, they can’t agree on the implications. Some say a weak dollar is O.K. Others say a weak dollar is disaster. Some say the government must bail out lenders. Others say the government must not. By the time the experts sort out the facts, we’ll be well into the next bull market.
  3. The media wants to sell advertising and subscriptions. They have an agenda. Their spin cannot be taken at face value.

Trying to operate a business in an atmosphere of Armageddon is murder — companies don’t expand and consumers don’t buy when they are worried. It is possible to talk ourselves — or more accurately, to listen ourselves — into a recession.

I don’t want to make light of the fact that some people are feeling financial pain right now — heck, I’m one of them. All I’m saying is, when the media obscure instead of enlighten, when they editorialize instead of inform, they’re not helping us deal with the situation. Great business people I’ve known over the years say there’s money to be made whether the economy is going up or going down. Jim Cramer, my favorite stock guru, likes to say there’s always a bull market somewhere. So don’t talk yourself — as a buyer or a seller — into a panic just because the media panders to your base cravings for excitement. It’s financial pornography, and it’s not a victimless crime.

Rebalance your perspective before you rebalance your portfolio!

  • If you’re going to read, read The Wall Street Journal. It’s as good as it gets for getting the breadth and depth of information you need to make smart business decisions. Reading a cross section of financial blogs makes sense, too. Bloggers often have an agenda, but if you get a broad enough range of opinions, you can usually get a reasonable idea of what’s actually going on.
  • If that’s too much work, unplug the TV, shut down the computer, and wrap fish with the newspaper. Blacking out the financial news (Mad Money excepted) will calm your nerves and help you think clearly.

How can your business survive slow times? How are you turning problems into opportunity?

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    • 4 Responses to “Are You Addicted to Financial Pornography?”

    1. Dick Garbe Says:
      March 17th, 2008 at 9:21 pm

      Brad, Well said! Ditto! Kindred spirit, you are. I’ve said this for some time, although not so eloquently. A nephew who graduated from Medill at Northwestern responded to such a critique of “journalism” with, “Don’t you know, for the last ten years at least the media’s focus is on selling entertainment - the “news” is just the vehicle they use. It is not meant to inform or educate the public.”

    2. Brad Shorr Says:
      March 18th, 2008 at 6:43 am

      Hi Dick, thanks for stopping by Word Sell! You have to wonder if 24/7 TV broadcast and the steep decline in print media are making journalists desperate. Does your nephew have a theory as to why this has happened?

    3. Dick Garbe Says:
      March 18th, 2008 at 9:51 am

      Theory: Money. As Sam Zell recently told the staff at the Tribune, “after we make money, then talk to me about journalism.” Everything today is about content, and the battle to get your content in front of the consumer.
      “Content” no longer is limited to TV; it is cell phone, video-game (the Nintendo Wii has a built-in web browser with wireless networking and games can be played over the web), print of any kind, internet… All just forms of communication that occupy the consumer’s time - that is, they all are forms of entertainment, designed to get a commercial message in front of the viewer/reader. Just a theory, but I think a very good one. Maybe the Wall Street Journal is there to inform/educate - that is the one stand-out that comes to mind.
      Dick G.

    4. Learn How Markets Really Work from Ken Fisher | Word Sell, Inc. Says:
      May 16th, 2008 at 5:16 am

      […] are all victims of financial pornography. Mainstream media does a horrible job of explaining what’s going on in the economy, why […]

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