Rules of the Game: Knowing What to Ignore

 | Sep 16, 2013 | 10:00 AM EDT  | Comments
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Today I want to follow up on my earlier column on "shiny object syndrome."

It's not only the chase for hot stocks that distracts investors from their goal. Media -- both traditional and social -- have ample powers to hypnotize with content that seems relevant and timely, but has absolutely nothing to do with your investment portfolio.

Here's a great example: Earlier this week, hedge fund manager and media personality Keith McCullough got into a Twitter spat with the anonymous writer of the blog ZeroHedge.

Apparently, it was great rollicking fun for many to track the pissing match. It was something to do with bullish or bearish calls on Kinder Morgan (KMP) and Linn Energy (LINE). I'm not being vague because I don't understand. I'm being vague because I read about the little spat for about one minute, and decided the following. First, I didn't care. Second, it really doesn't matter at all -- it's just entertainment for those who prefer drama from hedgies rather than housewives Third, I wasn't going to waste my time following the Tweet stream to get to the bottom of it. (Refer back to my first point -- I don't care.)

I recognize that it can sound terribly unsophisticated to give no credence to what this analyst or that hedge-fund manager thinks about any particular stock. But it matters just about as much as what some ESPN pundit thinks about the relative merits of the Patriots vs. those of the 49ers.  It may be fun, but it's not exactly relevant to anything in your actual life, even if you are superfan. It's just entertainment.

When you turn on the financial television channels, and see debates over this sector or that, this stock or that, or fixed income vs. equities, think of what is really going on. Do you ever see segments that explain portfolio construction? Do you ever see segments that painstakingly teach about asset-class diversification? No, not really. Instead, you will find debate and opinion in bite-sized chunks. That's because drama and conflict sell; education does not.

(And if you doubt that, think of the network now dubbed just "TLC." It's the home of such highbrow fare as "19 Kids & Counting," "Breaking Amish," "Extreme Cougar Wives," and, of course, the perennial favorite, "Honey Boo Boo." The network began life as The Learning Channel, in a quaint attempt to monetize people's desire to actually be educated and informed. That worked out well, didn't it?)

Don't make the mistake of thinking that financial TV channels are any different. Hey -- I enjoy seeing Jim Cramer on "Squawk on the Street" and "Mad Money." My colleague at Portfolio, Lee Munson, appears regularly on CNBC segments. But if Jim, Lee or anybody else at the network took an academic professorial approach, he or she would be bounced back to the ivory tower in a heartbeat.

I'm not saying that some information shouldn't be sugar-coated with the entertainment factor. But I am saying that media consumers -- including investors and traders -- need to use some critical thinking when they encounter the kind of drama that was especially in evidence with last week's little Twitter spat between McCullough and ZeroHedge. Keep your eye on your own goals, and don't become distracted by a couple of attention-seekers pounding their chests.

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