The Investor’s Nemesis

The Investor’s Nemesis

September 22, 2023

Superman battled Lex Luthor who was armed with Kryptonite.  Long-term, goal focused, planning driven investors battle something much worse.

Many may believe that I do not like the financial media, as evidenced by my articles, blog posts, podcast, and book.  Well, let me set the record straight - you would be correct in your assessment.  Why is it that my battling with them -- this hydra-headed beast of print, social and cable news – has continued for decades and will most likely continue furthermore?  Because the dominant determinate of real returns that real people get over multi-generations is not the result of the investments they own, but the behavior of the investors themselves. And the financial media feeds on it, and by “it” I mean the negative headlines that activate the behavioral spiral of Human Nature.  Now, it can be proven – with data.

The most recent findings from an article published in 2022 titled, (take a deep breath, because this is a long one) “Longitudinal analysis of sentiment and emotion in news media headlines using automated labelling with Transformer language models.”  You can breathe again.  They’re obviously researchers and not marketing people with that title.  So, what did they find?

The chart below shows the percentage increase of emotion driven headlines from 2000 – 2019.

The study included Twenty-Three Millon Headlines from Forty-Seven different outlets.  Let’s look at what they found in those news headlines:

  • Disgust – up 29%
  • Sadness – up 54%
  • Anger – up 104%
  • Fear – up 150%
  • Joy – up 14%
  • Neutral – down 30%

You may have noticed that the largest increases began around 2009, and the article provides the following reason:

In the year 2009, social media giants Facebook and Twitter added the like and retweet buttons respectively to their platforms. These features allowed those social media companies to collect information about how to capture users’ attention and maximize engagement through algorithmically determined personalized feeds. Information about which news articles diffused more profusely through social media percolated to news outlets by user-tracking systems such as browser cookies and social media virality metrics.

In the early 2010s, media companies also began testing news media headlines across dozens of variations to determine the version that generated the highest click-through ratio. Thus, a perverse incentive might have emerged in which news outlets, judging by the larger reach/popularity of their articles with negative/emotional headlines, started to drift towards increasing usage of negative sentiment/emotions in their headlines.

All of us with an adult memory have believed that the use of negative emotional headlines seemed to be increasing – just from a common sense or awareness of daily viewing standpoint -- and now we have factual data to back it up.  As a side note, I don’t blame the financial media for what they – as a business – are doing to generate revenue.  I don’t agree but understand.

However, this is the lifetime battle that every long-term investor must fight - a battle you were not aware you were fighting.  That fight is Human Nature against the negativity grenades thrown every day into your foxhole by an organization that’s primary source of revenue comes from how you react to those headlines.  Quite frankly, it goes beyond investing.  It affects every aspect of your life – but that is a much larger conversation.

Knowing what you now know, how do you battle it?  It comes down to what you focus on.  It’s a choice that needs to be made every minute of every day – without you even knowing your brain is processing it and how it affects your decisions.  In his book, The Brain – The Story of You, Author David Eagleman explains the following:

Our brains constantly pull information from the environment and use it to steer our behavior, but often the influences around us are not recognized. Take an effect called, “priming” in which one thing influences the perception of something else…if holding a warm drink…you’ll describe a relationship as more favorable…holding a cold drink…you’ll express a poorer opinion of the relationship.  Similarly, if in a foul-smelling environment…you’ll make harsher moral decisions.  If you sit in a hard chair…you are a more hard-lined negotiator…if you sit in a softer chair, you’ll yield more.

Now, can you just imagine what those Twenty-Three Million emotional headlines over almost two decades have influenced?  The choice of focus for our clients – the long term, comprehensive, multi-generational financial plan that we’ve built.  Because the outcome of your choice will dictate not only your lifetime income throughout retirement but your children and grandchildren’s ability to maintain the legacy you’ve built.  The alternative is to unknowingly allow the nemesis to blow up what took a lifetime to build.

Important Information


All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

All investments include a risk of loss that clients should be prepared to bear. The principal risks of Melone Private Wealth strategies are disclosed in the publicly available Form ADV Part 2A.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Source: Longitudinal analysis of sentiment and emotion in news media headlines using automated labelling with Transformer language models

Published: October 18, 2022 David Rozado, Ruth Hughes, Jamin Halberstadt