Junk news

Posted by on April 14, 2009 @ 8:51 am in Investing

Driving through the Pennsylvania countryside at 7:30 one morning, here’s the news I hear on the radio (read breathlessly): “And in the morning business news, Dow futures are down 300. S&P futures down 40. Nasdaq futures down 80.”

I’m amused by such announcements. Futures prices at 7:30 a.m. are the equivalent of a donut with your coffee: pure junk food.

Technically, futures prices do have some use for certain types of portfolio managers. However, I estimate that there are less than a dozen such persons in the Philadelphia media market, out of the 5 million served by this radio station. But those people probably are at their desks at 7:30, with futures prices up on their screens.

So for whom is this information being broadcast? One possibility is that it’s targeted to active stock traders. But most of the traders I’ve met are trading specific mid- and small-cap stocks or country or sector ETFs; I have yet to meet many individual investors actively trading futures contracts. Anyway, like the portfolio managers, wouldn’t they be at home or at work looking at prices on their computers?

Another possibility is that this information is being served up for the general investing public. It may be the circles I travel in, but I just can’t picture small investors tuning in their radios in order to learn about futures prices.

Which leads me to the following conclusion: The information is broadcast merely because it’s available. Futures prices appear on a financial website; there’s some airtime to fill, and so the radio announcer reports futures prices at 7:30 a.m. I have no doubt about the intentions of the show’s producers: They’re striving to inform the citizenry. How are they to know that they’re serving consumer finance junk food?

Futures prices at 7:30 a.m. tell us nothing about how the day, week, or month is going in the stock market. For long-term investors, what matters are year-to-year prices.

So, next time you hear futures prices or their equivalent, just recognize that it’s meaningless information—the equivalent of a morning donut, junk news used to fill up open airtime. You’d be best to ignore it and not let it affect your emotional state. If you can’t, just turn the dial.

Notes:

• All investing is subject to risks.

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