…some thoughts on the news media, and a lesson from Barack Obama

Following on from an earlier discussion about market cycles being driven by alternating waves of pessimism and optimism, I’d like to examine another angle of this ‘social mood’ aspect of the market, warn you about those who would exploit it… and pick up a lesson from Barack Obama.

The trouble with pessimistic doom and gloom is that it is highly contagious — and surrendering to despair never helps anyone.
Alarm, defeatism and paralysis are very rarely useful or productive.

On the other hand, the trouble with ignorant optimism is that it can lead you into danger by exposing you to risks which experienced investors have learned to avoid. Ignoring market realities and failing to learn the lessons of history are a recipe for a hammering.

It’s a fact that the great sharemarket crash of 1929 destroyed a lot of wealth — but much more was wiped out as investors bought back into ‘dead cat bounces’. It was the same in 1987 — I know people who were untouched by the 19-20 October crash but then got scalped as ‘bargain hunters’ buying back into the false rallies that followed.

Buying back too early into a falling market can be very dangerous.

As you probably already appreciate, one of property’s great advantages as an investment is that it moves relatively slowly. Sure, values can rise and drop — sometimes dramatically — but not overnight, nor over a weekend even a month. That very important PLUS is a by-product of property’s lack of liquidity.

But like a coin, this factor has two sides: that same advantage can be a real drawback when you want to (or have to) sell in a hurry. Fortunately, that’s not a position many of us find ourselves in. We can ride it out. The rapid turnover that property traders have relied on during the recent boom is (for now) a distant memory. The cycle rolls on.

So it’s been interesting in recent times to observe two messages promulgated by individuals seeking to be seen as leaders in the real estate investment ‘industry’:

1. ‘eeeeeeek! We’re doomed! This unprecedented global meltdown is a catastrophe of epic proportions’

2. ‘Buy now, no money down, hurry, hurry, before you miss out’

I’ve learned from personal experience to regard those making such statements with considerable distrust.

My view:

What’s needed is realistic, measured, impartial advice based on genuine experience.

What’s NOT useful is fierce urgency or continual negative, extreme, drama-laden language — ‘global meltdown’, ‘financial collapse’, ‘banking crisis’ — which some are using merely to attract attention.
Chirping on about the ‘creeping global recession’ while offering no real solutions or steps to deal with it is a waste of emotional and mental energy. I see some using this fear-based fluff to try to buy their 15 minutes of fame. Not convincing.

At Olly Newland’s What’s Next? evening last month we discussed briefly author Stephen Covey’s advice to ‘work within your circle of influence‘ — the valuable discipline of not wasting energy worrying about things you have no influence or control over.

Sure, you may be concerned about an issue, even alarmed by it. But if you have no real power to shape the outcome, for your own sake, ease back on worrying about it.
Focus on what you CAN affect or influence… start in your own backyard, your own business or bank account. Don’t be a magnet for useless negativity.

[However, in the right circumstances, bear in mind this wonderful quote attributed to Margaret Mead: ‘Never underestimate the power of a small group of committed people to change the world. In fact, it is the only thing that ever has.’]

Adrenalin junkies

Having worked in the news media, I know something of the imperatives driving journalists and news organisations. It’s not primarily, as some suggest, all about ratings and selling papers — not for the journos. They’re seeking IMPACT. One of my first chief reporters advised me: “Peter, write your stories so that people hear them on the radio and run out into the street screaming!” I think that still holds for today’s journalists.

Why are many news stories pitched dramatically and often blown up out of all proportion (shock, horror, scandal)? Because the writers and editors want to be immortal… or at least be noticed. News organs continually try to trump one another, beating up and ramping up the histrionics to do so. The hunt is always on to try to dramatize, to be the most urgent.
(“If it bleeds it leads” is another journalistic mantra.)

These comments are not meant as a criticism of journalists but the trouble is, the overused adrenalin-junkie approach usually just doesn’t help anyone. As the BBC’s Alan Johnston said recently, ‘The media can inadvertently make the financial storms WORSE by weakening our confidence.’ (He can talk!)

Market cycles are based on confidence much more than macro-economic factors (‘drivers and influences’ etc) in my view. So anything that amplifies our lack of confidence — especially without offering practical solutions — is worse than useless. Furthermore, if, as some are doing, the ‘panic stations’ call is being made to try to herd suckers into a pen like lambs to the slaughter, then it’s obscene.

Boom boom boom?

Something else that’s not useful is real estate salesmen (whether licenced or not, some posing as ‘educators’) pitching their pet projects using a ‘hurry, hurry, buy now, no money down, you could miss out’ spiel. Or slightly worse, employing personal development sales techniques: ‘Buy this NOW and take control of your life’ — simply, it seems, to earn their ‘nominal fee’ or commission.

I know I’m repeating myself, but let me say this:

DON’T listen to the spruikers or the alarmists, nor to the swinging media who can’t help their dramatic unending rush from crisis to crisis.

DO seek out independent advice from experienced people who are NOT trying to slot you into a ‘bargain’ investment.

In that vein, and in keeping with our mission and values at Empower Education, we try to offer a few resources and opportunities for you to connect with genuine experience … and get some impartial, relevant information to guide you in, let’s face it, pretty exceptional times.

Last words – a lesson from Barack Obama
At times like this, we need to harness what US Senator George McGovern identified as the strengths of Barack Obama: The three ‘I’s – integrity, intelligence and imagination.
Part of Obama’s intelligence was his seeking out experienced advisers.

In his victory speech Obama paid tribute to his campaign manager David Plouffe and his chief media strategist David Axelrod by name. Both are veterans of many previous bruising campaigns — seasoned warriors with the scars to prove it, not boom boys who were working it out as they went along.

That’s who YOU want on your team.

Find a way to benefit from the experience of others you can trust.
Get them (or their information) into your circle of influence.
If we can help, great. That’s what we aim to do.