Most believe the COVID-19 Virus pandemic has been devastating to our country and the world (which it has), however there has been a more severe virus lurking undetected for decades. A virus that continues to expand- Just-About-Every-Day. This virus, injected daily, creeps into the human psyche, and continues to destroy financial stability and increase the anxiety of millions of Americans every day. The Virus: The Media- in all its hydra-headed forms.
If Behavioral Finance (or Behavioral Science) has taught you anything, it should be the skepticism of any media outlet. Why? It infects the minds of investors, enabling bad “emotional” financial decisions from which many may never be able to recover. In addition, the lunacy of the media- if allowed -can not only lose investors’ money but their sanity, as the fear and anxiety of the next wave of “End of The World As We Know It” spews from the mouths/print/social sites like waterfalls of untreated media sewage.
This can be revealed in a common behavioral bias called- Recency/Availability Bias. In humans, it is the tendency to take the most recent traumatic event (COVID-19) and extrapolate it into the future…forever. Even when such an event has passed, the brain is continuously on the lookout for any hint of it returning. As an example: remember the built-up anxiety of the Great Recession that could possibly rear its ugly head again? Mere thoughts of the Great Recession bring many individuals back to the fetal position.
As a result, we tend to react to the emotions our brain provides by the following:
- Selling out of your diversified equity portfolio and setting it in cash/money markets (as of 8.1.2020, we have about 4.6 Trillion in cash as we speak- yes, it’s a record amount).
- Trying to time the markets by moving in and out, based on the news de jour.
- Buying a “guaranteed never to lose money” investment product you saw in a commercial (as they used the fear technique to tell you another market crash/depression is on its way).
- The ultimate fear sale (and myth) of- Buying Gold. As the world is in chaos and will never recover.
- In regards to anxiety, for the past three weeks the media, in all its wisdom- no matter what cable or online site- has been trumpeting how the “Virus Is Skyrocketing/Exploding/Surging/Wreaking Havoc” in states that have begun re-opening. The normal human reaction to said statement is; oh-crap, not again. I guess I will be cleaning my garage- again -for the fourth time as we go back into lockdown. Not a good prescription for anyone’s health and mental wellness.
In contrast to the above media reporting, the data from Johns Hopkins University states: New cases and hospitalization trends have continued to move in the right direction this week. On Tuesday (8-11-2020), the seven-day average of new cases in the United States fell 10.5% compared with the prior week, the seventh straight day of double-digit percentage declines for that metric (source: The COVID Tracking Project). Total US hospitalizations fell 8.9% compared with the prior week Here is the site to view the data: https://coronavirus.jhu.edu/data/new-cases-50-states
THE VIRUS EXPOSED
So, who are you supposed to believe? How are you supposed to trust that information? Is that data recently stated, an opinion or fact (or a version of said fact)?
I am not certain to your views, but I have become a skeptical person when given any “fact” by a media source/social site/print news/industry/government (well, that’s always been a given)/ or an individual. Sad. But True. Maybe there was something foretelling to the former quote of, “Trust but Verify.” Unfortunately, we have become a society where the more information we have access to - at any given milli-moment - has become not a benefit but a hinderance - garbage in…(emotional) garbage out.
The next question most would ask is, why does the media take this approach? An obvious reason - Revenue. Or better explained, the battle of “clicks” or “eyeballs” for advertising revenue. As a capitalist society this is all fine, but the issue arises when all facts that should be - yah know - facts, are hidden behind the smoke-n-mirrors of a version of the facts. Which are than fed to the public as gospel and leads me back to my original point - the more severe Virus has been invading the human mind/emotional system for decades and now has morphed itself into a super-pandemic of the media’s conjuring. Unfortunately, as they have said many times, “Never allow a Crisis to go to waste.” I would add, whether real, imagined, or fabricated.
Important Disclosure: Melone Private Wealth LLC (“Melone Private Wealth”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Melone Private Wealth and its representatives are properly licensed or exempt from licensure.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.