Don’t Listen to the “Chicken Littles” of the Media

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

We investment analysts are the “Chicken Littles” of media.

A single bad day in the market, and we are ready to shout “the sky is falling!” to anyone who will listen.

But unlike the fairy tale, our story never ends…

When I travel to the United States, all I hear is that “Europe is imploding” as I glance at a newspaper headline with the obligatory picture of a masked rioter in Greece.

At the same time, when reading the European media, I’d expect to see people begging in the streets in the United States everywhere I go. And of course, I dread crossing bridges — as everyone knows U.S infrastructure is on the verge of collapse.

I am exaggerating here. But I do so to make a point about how the media distorts your perceptions of the world.

You have a lot less to feel lousy about than you think.

The Media’s Profound Negative Bias

Your college communication textbook tells you that the news media publish 13 negative stories for every positive one.

Running through my list of financial blogs this morning, I think that statistic is outdated. Just eye-balling it, the ratio seems closer to 50 to 1.

Here’s my favorite headline of this morning, as an example: “A Whole Bunch of Impending Disasters That Are Staring Markets in The Face.”

Designed to trigger a fight or flight response deep inside a part of your brain called the amygdala, this article is chock full of information that will be irrelevant to anyone within 24 hours. And that’s being generous.

But here’s what really bugs me.

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First, the financial media displays an utter lack of perspective. If Europe is “imploding” by the standards of today’s non-stop, 1,440-minute a day news cycle, how would have they described the Old Continent when countries that now share a currency were killing 40 million of each others’ citizens during World War II?

Second, it’s remarkable how few of the extreme predictions that get your daily gander up come true. Gold didn’t hit $2,000 at the end of 2009, as one well-known doom and gloomer predicted. Nor is it likely to hit his target price of $5,000 at the end of 2012. And rather than collapse, the U.S. dollar is trading just about where it was right before the financial crisis.

Bond bears, including the iconic Bill Gross, could not have been more wrong. U.S. Treasuries have proven to be the ultimate safe-haven asset, and interest rates have plummeted to record lows. If you bet against U.S. Treasuries through the ProShares UltraShort 20+ Year Treasury (TBT) on the day the United States lost its AAA rating from S&P last August, you’ve lost close to 50% of your money.

ProShares UltraShort 20+ Year Treasury (TBT)

How About Some Good News?

I had to look long and hard through today’s financial headlines, but I did manage to dig up a couple snippets of good news. It’s no surprise that this is the only place you will read about them.

1. U.S. Real Estate Market is on Fire

May was a blockbuster month for U.S. real estate sales. Seattle was up by 23% vs. last year — apparently the most dramatic increase in at least five years.

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Other cities reporting double-digit percentage gains include: Pittsburgh, up 20%; Albuquerque, rising 29%; the Denver-area, growing 24%; the Memphis area, jumping 25%; Chicago, climbing 19.2%; Nashville, netting 28.5%; Boston, shooting up 28%; Charlotte, increasing 18.2; Iowa, improving 14%; Birmingham, beefing up 21%; Milwaukee, soaring 30%; Charleston, leaping 24%; and Baltimore, edging up 13%.

2. Small Business Optimism is at its Highest Level since December 2007

The NFIB Small Business Optimism Index increased to 94.5 in April, compared with 92.5 in March. This tied February 2011 as the highest level since December 2007.

Since two-thirds of the price of gasoline is determined by the price of oil, that should continue to lower prices at the pump.

3. The World Has Never Been More Peaceful

Despite the Arab Spring and headline-grabbing violence in Syria, The Global Peace Index, produced by the Australia and U.S.-based Institute for Economics and Peace, is back to record highs.

The survey studied 23 indicators across 158 countries, ranging from measures of civil unrest and crime to military spending, involvement in armed conflict and relations with neighbors. Aside from the deterioration in the Middle East, every other region in the world showed improvement.

Harvard psychologist Steven Picker wrote a book just last year on how we fail to appreciate the decline of violence in our societies: “The Better Angels of Our Nature: Why Violence Has Declined.”

Why You’re Pessimism about the Future is Wrong

If you’re like most people, you’ll think what I’ve written is bunk. And that I clearly have no idea what I am talking about. After all, “everyone” knows that the world is coming apart at the seams. Just look at 49 out of 50 financial headlines this morning.

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But I not only disagree, but I think the opposite is true.

I believe that thanks to a powerful combination of under-appreciated technological progress and an emerging culture of entrepreneurial philanthropy, the United States, in particular, is set to enter a golden age of prosperity.

For a hint of what this will look like, read “Abundance: Why the Future is Better Than You Think” by Peter Diamandis and Steven Kotler.

As the German philosopher Arthur Schopenhauer observed:

All truth passes through three stages.

First, it is ridiculed.

Second, it is violently opposed.

Third, it is accepted as being obvious.


Nicholas A. Vardy
Editor, The Global Guru

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