Stewart v. Cramer: Distinguishing Between Entertainment and Information

jon-stewartLast Thursday Jon Stewart retired, and the internet led the farewell tour by reliving the best moments in Daily Show history. One moment that showed up in every single “best of” list was Jon Stewart’s takedown of Jim Cramer in 2009, when the wounds of the Great Financial Crisis were still very fresh.

“Instead of being “a very powerful tool of illumination,” Stewart told Cramer, “It feels like we are capitalizing your adventure by our pensions… It is a game that you know is going on, but you go on television as a financial network and pretend it isn’t happening.” Added Stewart: “Isn’t there a problem selling snake oil as vitamin tonic?”

While Stewart’s points were very valid, the interview gets fairly uncomfortable at times, as Jim Cramer is made the whipping boy for all the sins of both the financial industry and the media that perpetuated the problem.

Any lessons learned as a result of the verbal lashing of Jon Stewart, however, were short lived. More than six years later, media still contributes to the melee and it’s more prevalent than ever – from the elevator ride to the “stocks” iPhone app that Apple won’t let you delete.

With all the headlines and articles, videos and tweets out there today, how do you distinguish between what matters to portfolios and what is just noise? First, It is important to remember that inches and headlines dedicated to a topic are not indicators of importance to your investment portfolio. Our recent Research & Papers entry “Three Trends Guiding Our Investment Policy Today” gives two excellent examples pulled from summer headlines:

To put everything in perspective, it is helpful to remember Greece has the same GDP as Connecticut (which is twice that of Puerto Rico), and China represents roughly 2% of the global stock market index (as measured by the MSCI All Country World index), despite an economic contribution to global GDP of nearly 15%.

Second, as we have long been counseling clients, the best way to tune out the noise is to focus on the things you can control, which include

  • Risk – finding exposure less dependent on the direction of equity markets or interest rates to generate returns;
  • Liquidity – keeping “dry powder” on hand;
  • Tactical rebalancing – rebalancing a portfolio opportunistically as opposed to a calendar-driven approach;
  • Fees – working to keep the fees our clients pay as low as we can.

Focusing on these helps keep a long-term perspective, instead of getting lost in the daily ups and downs of the market. After all, just because the stock market is down 2%, does that really mean that the world consumed fewer Cokes on that day?

Finally, and perhaps most importantly, learn to distinguish between entertainment and information. In his book, The One Page Financial Plan, Carl Richards admits that titling a book “the hottest stock tip” or “the best financial advice you’ll ever receive” would have garnered much more attention. But it is just fluff. Recognizing the noise for what it really is – entertainment – will help keep you focused on reaching your personal financial goals. Which, at the end of the day, is all that should matter.

After all, Cramer himself conceded to Stewart, he’s just “a guy trying to do an entertainment show about business.”

 

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