Lynn Carpenter

For serious news from the market, The Wall Street Journal, Barron’s, and Financial Times crown all other striving media.

This is where the pros go with their morning coffee for more than simple quotes.  You can get the put-to-call ratio, short interest, the price of gold, insider activity, new issues, takeover stories …

The data stream is wide.  The reporting is broad and halfway deep.

And for a view of what’s wrong with the market, you once again go to The Wall Street Journal, Barron’s, and Financial Times.  The reporters have become advisers.

Now you can not only find out what’s going on, you can discover what you’re supposed to think about it.

In other areas of media, reporters making or slanting the news is taboo.  The conservative, old-fashioned press doesn’t directly reveal what it thinks.  Opinion is carefully pushed back to the editorial page.  It comes from columnists, not regular reporters. 

Once upon a time, those opinionating columnists who were not on the editorial pages were often placed near the comics pages.  That was to remind readers that opinion is second-class entertainment, not first-class fact.

But this week, Barron’s tells you the January rally has thoroughly ended.  Worse, it’s probably another couple of months before the market gets to its feet again.  Then Jeremy Grantham weighs in that it’s probably going to be 2010 before it’s really good again. 

Oh yes, and there’s that bear market-recession staple: “Buy Food Stocks” is the message of the front page.

Monday’s Wall Street Journal tells us that the current credit bust was a prelude, and that more problems are on the way.

The Financial Times declares that IT spending is forecasted to slow down.  There’s more on the global credit crisis.  Plus we get a dose of speculation that hedge funds are in danger of shutting down because they can’t borrow enough anymore.  

How is a rally supposed to grow out of all this opinion from a media that investors thought was delivering the facts?

There is a huge difference between reporting (what has happened, what it connects, what it means) and speculation (guessing what will happen next).  Our most serious financial media have ceased to draw the line.

And this feeds crises like throwing bacteria on an open wound.

The big, staid old financial press has become television.  Reading them is like lurching from 30-minute sitcoms of fevered nuttiness (Oh no, someone wore the same dress!  Oh no, my mystery date is the boss’s daughter!) to 60-minute dramas that solve crimes right on time. 

The financial press now stirs a sense of constant climax or crisis whether the real thing exists or not.  If there is none, or the edge of the present crisis has dulled, it will report that someone thinks there’s another crisis coming.

What I find interesting about this is that Sunday night I was watching the Grammies and rereading a little book I found on a high shelf called Mastery by George Leonard.  He describes constant climax as one of the six roads to failure.

Mastery comes from consistent, long-term practice achieved via many plateaus after each higher stage is reached.  You spend a long time practicing nuances at the plateaus before the next stage of mastery and another breakthrough comes.

For instance, we all know the “dabbler” who gets excited about every new hobby, buys all the equipment, wears all the new gear, and quits in a year or so to move on.  We also know the “hacker.”  This is the guy who gets pretty good quickly, then coasts at the same level for the rest of his life.

More subtle, but just as deadly, is the pattern of constant crisis.  This is the model of the neat sitcom situation and the one-hour drama.  Real mastery has many fewer peaks, much farther apart, and far less adrenalin.  It takes place on plateaus where you practice what you know and get deeper and deeper into it, until you have another breakthrough.

I thought about my own path as an investor (and felt a little better about how long it has taken to come this far).  At first, all I knew was that earnings were supposed to rise.  Then I learned how to use P/E ratios, or at least I thought I did.  I stayed with them for years as my mainstay before the real importance of sales dawned.  Then return on equity chimed in.  And all this led back to a better understanding of P/E ratios than ever before.

It was the same way in technical analysis.  Just trendlines at first.  Then point-and-figure analysis for many years by itself.  Then other tools.  Eventually, I took the Bollinger bands back to point-and-figure charting.

Reading is a good habit for investors.  All the greats are voracious readers.  But it is fact they seek, not reporters’ opinions.  In Saturday’s Investor’s Daily Edge, for instance, I noted that in all the reporting about the service economy slowdown last week, none of the reporters mentioned that the same report showed businesses feeling secure in their ability to borrow.  That was not sensational.  It got no mention.

Let the reporters give you as many facts as they can gather.  They are good collectors with special access.  But I’ll bet you can do an even better job drawing your own conclusions … and developing mastery yourself instead of outsourcing.

And don’t even worry if you get a conclusion wrong here or there.  Look at the stuff that gets reported, such as yesterday’s story in FT that Forrester Group predicts IT spending will grow six percent and exactly $1,695 billion this year ... with the note that two months ago, the very same Forrester folks said it would be nine percent and precisely $1,758 billion.

Respectfully,

Lynn Carpenter

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