How to Read Financial News

How do you read your financial news every day? Discerning what kind of financial news to read every day can potentially double or triple your productivity at the desk. Even though some newsletters are your favorites, they might not help you formulate your opinion of the markets. Sometimes, research often tends to look back then forward and most of the time its content tells little and gives too few insight into the future.

Most portfolio managers learn to rapidly detect what is nonsense and move on. It’s even harder now with the investment blogs turning more into tabloid journalists exaggerating news in the short term that has no effect on the long term. It is much harder to stay well informed when short term news is distorting transparency. So, like most professionals in the industry, you’re on your own when it comes to what you believe in and what you don’t.

 

Here are three questions to ask when trying to discern financial news. - What is the article based on? (Data or Opinion) - Is it descriptive of the past or the future? - Does the article have a testable hypothesis?

 

Best Practices

1. Understand the Consensus - Do the groundwork for a specific investment thesis and grasp the conventional wisdom in order to make a big bet or bet against a stock.

2. Seek Disagreement - Reading opinions that go against the grain is important in learning the investing environment. Also, try to avoid a confirmation bias.

3. Question the Narrative - Most narratives are incomplete, misleading or flat out wrong. Make sure to get the full story first.

4. Respect the Data - “Numbers Never Lie”. Blast through the charts. Data and numbers for corporate results and economic data. Some people prefer charts to commentary.

5. Avoid Partisan Interpretation - Know who has political bias and who doesn’t. Also, be aware of what your political affiliations are and keep them at the door.

6. Develop your own Framework - Don’t be influenced by everything you read. I think this can be a common trait for people who are new to finance and are afraid of being wrong about something.

The bottom line is no one can always win in this industry so you’re going to lose sometimes no matter what. What are your best practices for reading financial news and do you implement these best practices in your daily lives? Source

 

 

confirmation bias is huge. one thing I like to do is keep commentary from different strategists whom I respect handy, and be sure they represent bullish & bearish points of view for whatever asset class I'm talking about.

also, one thing I try to avoid is reading people who don't have anything at stake, which is why aside from the WSJ and BB research, I pretty much just read commentary from people who manage money. something to keep in mind with this strategy however is that almost all money managers are biased towards their asset class (I don't think bill gross has every liked stocks in his entire life, and I don't think siegel has liked anything BUT US stocks), so it's important to read unconstrained managers' commentary.

 

Research/ portfolio guys--What do you all think about Zerohedge.com? As someone relatively new to keeping up with financial journalism, these guys seem to consistently pump out articles that defy the conventional wisdom and really dig into the numbers that sources like WSJ just gloss over. A good example of this is their most recent article where they dissect the most recent job numbers report to find that almost all of the ~250,000 new jobs added this quarter were waiters and bartenders, and none in middle class manufacturing. How accurate/unbiased would you say these guys are?

 

Zerohedge is a very good read but you have to be very careful how you read it. It does indeed uncover secrets and important insights however they overrrrrr exagerate things to make the world look the worst possible.

If you know how ignore irrelevant pessimist commentary & information on ZH you will be fine.

 
Best Response

A few thoughts which may or may not be helpful:

  1. I use twitter to aggregate as much content as possible. I've found it works very well once you follow enough sources, pundits, etc. You get a wide breadth of material.

  2. Read everything you can get your hands on. Even if you don't agree with it, force yourself to read it. If you are really crazy, write in the margins or somewhere the key points where you disagree. Then try and find sources, articles that purport that view point. Rinse and repeat.

  3. Call people who are in the markets and talk with them. Getting viewpoints, color, etc. is invaluable. Everyone who works in this industry should have at least a few folks who you can talk with over drinks or something to get some insight.

  4. Stop reading and start writing. Want the quickest way to form an opinion that is your own? Write daily what is going on in the markets, the things that piqued your interest and maybe even some thoughts or comments on what is going on. Share it with your friends. Keep it to yourself. Doesn't matter, but just the act of reading a bunch of stuff and then having to articulate it is very important. Forces you to think about what is and isn't important.

For what it's worth, I'd say that number 4 helped me the most early on, and then reading as many different opinions as possible was the second step. If you are still overwhelmed, I'd recommend focusing on a specific industry or asset class, and then branch out from there.

 

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