Enis’s Macro Wrap – Beware Media Bias

by Enis November 9, 2012 7:50 am • Commentary

The SPX closed below the 200 day ma for the first time in 5 months.  I think it has more to fall based on the lack of panic shown by the VIX.  However, I’m likely to take some gains today since the market has fallen more than 50 points in a couple days.

But I want to take a brief detour today to talk about a topic that impacts all market participants.  It’s media bias.  Media bias immediately evokes politics in many minds, but I have no interest in talking politics.  Rather, I want to point out the impact of media bias on market participants and policymakers.

So much of media is agenda-based.  I remember watching analyst after analyst during the 1990’s tech bubble, mentioning strong buy on stock after stock.  It wasn’t a question of whether a stock would quadruple your money – it was simply a question of how long it would take.

Guess what?  All those analysts were basically instructed by their employers to pump stocks.  And pump they did.  Rules changed after the tech bubble crashed, but nuanced agendas still persist throughout the financial press.  And it still mostly involves pumping stocks.

The effect of media bias on market participants is not restricted to the financial press, though.  International news gets very biased coverage as well.  For example, we were very quick to hear about the uprisings in Libya in early 2011 or Syria in early 2012, but I imagine most Americans have no clue that Bahrain is in the process of brutally suppressing its own protesters.  Saudi Arabia sent in army reinforcements last year to strike down protests in Bahrain, and hardly a word in the American press was mentioned.  Not surprisingly, Bahrain and Saudi Arabia are American allies, while Libya and Syria were not.

The media commentary surrounding the European crisis is another instance of agenda-pushing.  And it affects how billions of dollars get allocated, and how trillion dollar policies get negotiated.

In short, be aware of your messenger as much as the message being peddled.  It’s the experience of many losses that has ingrained that in my own trading.

Markets overnight:

  • Asia broadly lower again, following European and American weakness again.
  • Europe actually opened slightly higher, by selling right after the open has driven the indices down 1%.  Greek headlines remain ugly
  • SPX futures now down 0.5%.  Seems like we’re hitting some severe technical selling the lower we progress in index prices.
  • Treasury bonds and the dollar higher, though Treasuries are the real outperformer this week.
  • Commodities ex-precious metals lower, with gold and silver slightly higher.  Copper at 2 month low
  • Boehner speaks at 11am and Obama at 1pm, so could be volatile intraday