Using the Evening News as a Contrary Indicator
by Jeff Clark
August 31, 2006
The evening news is nothing more than a hype machine.
Today, the evening news is less about the facts and events than about boosting ratings. As a result, watching the typical network newscast is like watching a video edition of The National Enquirer.
Instead of the dignity and respectability of Murrow and Cronkite, we’re now treated to the perkiness of Katie Couric and the arrogance of Geraldo Rivera.
And the hype! Oh my goodness… the hype.
How many days did the news lead with ridiculous saga of the John Mark Karr arrest? It was apparent from the beginning this nut didn’t murder JonBenet Ramsey. His ex-wife provided the alibi that cleared him of the crime. John Mark Karr may be a despicable waste of human tissue, but he didn’t murder JonBenet.
Nonetheless, the media obsessed over Karr… so much so that we even know what he ate on the plane ride over from Indonesia.
I think we’re now at the point where we can bet against the evening news and make a lot of money. When the news obsesses over a story, the odds are pretty good it’ll pay to take the other side of the trade.
Take Hurricane Ernesto as an example… Er, I mean Tropical Storm Ernesto. Actually, I think it’s Really Big Dark Cloud Ernesto.
The media is desperate for a tragedy of any kind to piggyback on the anniversary of Hurricane Katrina… and they latched on to this weak storm formation in the Atlantic Ocean. Two weeks of newscasts were dedicated to watching the little orange, red and yellow circles on the Doppler radar… and how close they were to the oil rigs in the Gulf of Mexico.
Collectively, the news anchors wondered out loud…
“What will happen if the oil rigs are taken out?”
“What will happen if New Orleans is hit again?”
And then last Saturday, a depressed group of newscasters - like six-year olds who just learned there’s no Santa Claus – faced the reality that Ernesto was a harmless summer shower.
Oil prices, which spiked higher last week in response to the hype, sunk along with network news ratings points on Monday and Tuesday.
Traders who took advantage of the hype and shorted oil before the weekend were swimming in profits by Wednesday morning.
Need another example?
Go back to the August 22nd edition of GSW, where I wrote about the idea of buying the housing stocks ahead of the release of the new homes sales numbers. That trade was inspired by a Monday evening network newscast on the impending collapse in the housing market.
The new homes sales numbers were absolutely horrible… but the housing stocks were up on the day. And, they’ve rallied about 5% since then.
It’s safe to say that by the time the network news features a shock segment on any issue, stock prices have already discounted the “news.”
I don’t get my “news” from the major networks any more. But I do get quite a few good trading ideas.
Best Regards & Good Trading,
Jeff Clark
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