The Online Investing AI Blog

Recently, as the stock market soars, there has been a large amount of news about how well the economy is doing. They say that the housing market has hit bottom, and that the economy is recovering. However, this article by the Associated Press is about how unemployment is rising.

Regardless of what the newspapers say, it is important to look at the fundamentals that drive the economy. The government has created massive band-aids to prevent a depression, and they seem to have worked. But it is important to understand the difference between a recovery and a temporary band-aid.

What effect will the band-aid have?

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Money, US Economy bailout, CNN, debt, deficit, dollar, economy, foreclosure, housing, media, Money, Obama, spending, unemployment, USA Today

Media bias is a well known theory  in the political realm. The writers and reporters who bring you information and news can’t help not sliding some of their political or philosophical bias into their articles and news reports.

If a reporter has a liberal bent, so will his or her article. Conservative news outlets offer that point-of-view.

Where investors run into trouble is when they believe the bias only relates to political news. As they consume the information, or absorb it, they let it alter their perceptions of reality and how they react to that reality.

However, media bias can cause–and is causing–an effect on your portfolio and your returns.

Here are a few ways how media bias can cause financial bias.

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Investing, Money, Online Investing AI, US Economy bias, invest, Investing, investing bias, media

The recent run up in gas prices has created a bonanza for the media. The reason for this is that newspapers, online news outlets, and nightly news programming is 99% bad news. There is even a saying, “No news is good news.” I guess people say that because nearly all news distributed through the media is bad.

If I look at the top 3 news items on the front page of Yahoo right now, I see 3 pieces of bad news. The topics are:

• A hostage and terrorism
• Iran’s nuclear program and potential conflict
• The price of oil and supply disruption

Consider this headline:

Oil drops sharply as worries about supply disruptions ease

In fact, they have even taken good news and turned it into bad news! The story is that the price of oil has gone down, but the headline focuses on what the problemcould be: supply disruptions. By focusing on potential future problems, this headline generates fear in the mind of the reader.

Why is the media always about bad news? Because bad news sells. If you walk by a newspaper stand and the headline says, “Nice weather today and everything is fine,” then you will probably keep walking. But it says, “Thousands at risk from flash floods and firestorms!” Now, they have given you a reason to buy the newspaper. We want to know what will happen to all those unfortunate people.

The challenge with negative media is that it has a powerful effect on its audience. Most people are totally unaware, but everything that we hear and see is forever recorded inside of our unconscious mind, and affects us for a long time. When we take in negative information it becomes a part of us and makes us more negative.

It turns out that the recent rise in gas prices is not bad news at all. It is totally natural. America has had the lowest prices in gas for decades, and the American public was totally unaware. In most other countries, gas cost at least twice as much as it did in the U.S. Even in developing countries, where the average income is far less than in America, gas cost twice as much. Americans have enjoyed the benefits of incredibly cheap gas for a long, long time, and didn’t even know it!

Its much easier to sit down on the sofa and watch the 6 o’clock news than it is to go to another country, rent a car, and see what it is like to drive around in another country. Most Americans have not even found out how much gas costs in other countries, let alone actually going to another country and seeing for themselves.

All this to say that the media has used gas prices to sell newspapers and increase viewership. But they have done nothing to help Americans understand that they have had a free ride for a long, long time.

Business Strategy gas, gas prices, media, news, newspapers