Page 516 - How to Make Money in Stocks Trilogy

Watching the Market and Reacting to News 385

assassination, an outbreak of war, the Arab oil embargo, expectations of gov-
ernment actions such as wage and price controls, 9/11, war in the Mideast
and, more recently, in early September 2008, when subprime real estate news
got worse and the market expected a very liberal president to be elected.

Old News versus New News

After it’s been repeated several times, both good news and bad news
become old news.
Old news will often have the opposite effect on the stock market from
what it had when the news first broke.
This, of course, is the opposite of how propaganda and disinformation
work in totalitarian dictator-controlled countries. There, the more often a lie
or distortion is repeated to the masses, the more it may become accepted as
truth. Here, when news becomes widely known or anticipated, it’s “dis-
counted” by experienced individuals in the marketplace, blunting the effect
of its release—unless, of course, the news keeps getting worse than expected.
To market neophytes, news can be paradoxical and confusing. For exam-
ple, when a company releases a bad quarterly earnings report, its stock may
go up in price when this is reported. When this occurs, it’s often because the
news was known or anticipated ahead of time, and a few professionals may
decide to buy or to cover short sales once all the bad news is finally out. “Buy
on bad news” is what some wily institutions use as a guide. Others believe
they should step in and provide support for their large positions at difficult
times.

Analyzing Your National News Media

How the national news is edited and presented or suppressed dramatically
affects the economy and public confidence. It can also influence public
opinion of the government, elections, our presidents, and our stock market.
Several excellent books have been written on the subject of analyzing our
national news. Humphrey Neill, author of the 1931 classic Tape Reading
and Market Tactics, also wrote The Art of Contrary Opinion. It carefully
examines the way identical news stories are reported quite differently in the
headlines of different newspapers and how that can be misleading to stock
owners and the public. Neill developed contrarian theories based on how
frequently conventional wisdom or consensus opinion expressed in the
national media turns out to be ill-conceived or just plain wrong.
In 1976, media expert Bruce Herschensohn wrote The Gods of Antenna,
which tells how some TV networks manipulate the news to influence public