Five Financial Headlines that were Laughably Wrong

Wyatt Investment Research

There’s a great Saturday Night Live sketch from the late ‘90s in which Norm MacDonald portrays Larry King offering “News and Views” that are hilariously misguided.

Some excerpts from that sketch:

 “If you only see one film the rest of your life, it should be Mickey Blue Eyes.”

“Prediction for the new millennium: We will see a lot more of John Larroquette.”

“I don’t care what anyone says, in my book, Ted Kaczynski is not the Unabomber.”

Quite often, it seems, financial headlines mimic MacDonald’s Larry King spoof.

In this age of the 24/7 news cycle, there are thousands of news sources covering the same stories. To get an edge and differentiate themselves from the competition, they all try and put a unique spin on the stories – sometimes by making bold or even outlandish claims. Readers are constantly searching for a fresh take on a popular issue, and whichever news source has the boldest headline often attracts the most eyeballs.

Sometimes, however, those headlines end up being so wrong that they belong on Saturday Night Live’s version of Larry King.

Here are five recent headlines regarding major financial issues that were laughably wrong:

Fiscal Cliff Now Market’s Big Worry – USA Today, November 7, 2012

What they said: “Investors are nervous about the market and don't want to feed it capital because they don't know what the rules of the road are going to be.”

What actually happened: From November 7 through December 31, the day Congress reached a compromise to avoid the fiscal cliff, stocks actually increased 2.3%. Doesn’t sound like they were too nervous.

Stock Investors Spooked By Sequestration Fears – Wall Street Cheat Sheet, February 28, 2013

What they said: “After having been ignored for most of the week by U.S. investors, (sequestration spending cuts) moved to the front burner with a steep sell-off into market close.”

What actually happened: Sequestration’s Wall Street “front-burner” status lasted all of one day. The March 1 sequestration deadline came and went without a deal to avoid the $1 trillion in automatic, across-the-board budget cuts impacting everything from military spending to school job creation. Investors hardly seemed to notice: stocks rose 2% the first week in March, and are up 10% since the supposedly dreaded sequestration deadline passed.

Market Selloff after Obama’s Re-election No Accident, Recession Coming – Forbes, November 14, 2012

What they said: “Now that the election is over, stocks are dropping with no bottom in sight. This is no accident given investors’ fears of higher taxes and continued big spending. … In fact, I believe we are headed for a recession.”

What actually happened: Forbes contributor Charles Biderman produced that gem. Well, Charles, there was a bottom in sight. In fact, it came the day after you wrote this article. On November 15, a post-election rally began. Stocks have risen every month since, gaining 23% in the process. And fears of a double-dip recession have all but vanished.

Facebook IPO: Buy Early and Buy as Much as You Can – Forbes, May 17, 2012

What they said: “Buy early, buy a lot or at least one share. Consider yourself advised.”

What actually happened: Driven by unprecedented hype, Facebook’s IPO was grossly overpriced at $38 a share. The selloff began immediately: within two weeks, the stock was down 32% from its IPO price. Facebook shares have never been higher than $32.47 in the year since the company went public.

Apple’s Quarter Was Lousy, But Stock Still Headed to $1,000 – Forbes, October 26, 2012

What they said: “Despite disappointing quarterly earnings from Apple, my long-term Apple (AAPL) stock target of $1,000 remains intact. … There is no change in the 55% probability of reaching $1000 target.”

What actually happened: I hate to keep picking on Forbes, but wow have they gotten a lot of things wrong in the last year. This laughably incorrect prediction came from contributor Nigan Arora. At the time, Apple shares were going for $604. They closed yesterday at $443 – a decline of more than 28%. Perhaps Apple will someday get to $1,000 a share…in which case, Mr. Arora would technically be right. Maybe he should have said $1,000 was his “reeaaaally loooong-term” target price for the stock.

Bottom Line

I’m sure many of these same news sources have gotten plenty of things right recently. Therein lies the problem of the 24-hour news cycle: everyone is constantly churning out new content that they’re bound to get a few predictions wrong.

The best thing you can do as an investor is tune out all the noise. Oh, the news is important – you need to read about what’s going on in the financial world to make informed investment decisions. But unless they come from expert investors such as Warren Buffett or Jim Rogers, you should take most opinions about what might happen next in the markets with a few grains of salt.

Don’t change how you invest based on a financial headline. Many times, the headlines are wrong.



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