The financial media does not have your best interest in mind. The people on TV know absolutely nothing about your personal financial situation. Please do not take what they say as investment advice.
In this week’s video, Casey explains 5 phrases the financial media uses to keep your eyes on the screen when markets are down.
The Financial Media Does Not Have Your Best Interest in Mind – Full Transcript
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Casey Mullooly: In episode 292, we’re going to talk about scary industry jargon.
Casey Mullooly: Welcome back to the Mullooly Asset Show. I’m your host, Casey Mullooly, back with you here for episode 292. And we’re going to talk about phrases that the financial media uses to keep your eyeballs glued to the screen.
So we talk about it pretty often here, about how the financial media definitely does not have your best interest at heart. They know absolutely nothing about your personal financial situation, so you got to take everything that they say with a grain of salt and know that their goal is to keep your eyes on the screen, not to give you actual prudent investment advice.
Casey Mullooly: So with that being said, we have seen over the last couple of days some big down days in the market. And with that we know the likes of CNBC and Market Watch and all of these other industry websites or TV channels are running their markets and turmoil special. And we have kind of a running joke here in the office that, that is a good buy signal for us. So let’s get right into it. We’ve got five phrases that we’re going to talk about and the first one being a bear market.
Casey Mullooly: So a bear market is loosely defined as an investment losing or being down 20% in value. What isn’t talked about is that bear markets are a natural part of the investment cycle. In fact, there’s been 14 bear markets since the end of World War II. And again, what isn’t mentioned is the fact that a new bull market and all time highs have followed every single one of them, so is this time different? I don’t think so.
Casey Mullooly: Number two, buying the dip. This is one that we’ve talked about before, and the idea is that when stocks go down you should actually be buying them, which in theory is probably true.
Every market dip in hindsight looks like a buying opportunity. But what we have to keep in mind is that we don’t want to get our risk allocation out of line in these types of markets and the timeframe for buying the dip to pay off doesn’t necessarily have to be a snapback, it could be a lot longer than people may think. So that’s buying the dip.
Casey Mullooly: Onto number three, oversold. What does oversold mean, when investment gets oversold? So this is a technical indicator that measures the price action.
What the price of an individual investment is doing against its other valuation metrics, if you will. It’s used as more of a trading tool and we’re not recommending that you go ahead and do this, but it is believed that when an investment reaches extremely oversold territories, the price should see a bounce because the selling can’t continue so that’s the theory behind oversold again, not recommending that, but that’s how it’s used.
Casey Mullooly: Number four is the moving average. You hear often the most common moving average is used are the 200 day and the 50 day. So 200 day moving average is a longer term moving average, it represents about eight months or 40 weeks in the market.
50 day, moving average represents the last 10 weeks or the last two and a half months. And basically how it works is you take today’s average and measure it against the average over the last 200 days or whatever timeframe you’re using, and if today’s average is higher than the average of the last 200 days, then that suggests that stocks are moving higher and when stocks are below they’re moving average, that means that they are moving lower.
So you can get a little more technical with using it, but just want to keep things general here.
Casey Mullooly: And last but not least number five is capitulation, which is an interesting one. Basically another way of saying panic, which again, not recommending doing. But basically the idea when other stock market participants capitulate is they see everyone else selling their stocks and they go ahead and decide to sell their stocks.
And this is how the selling kind of compounds on itself and can get out of control and things can get out of hand quickly. And like, we’ve seen that over the last couple of days. Again, it’s important to not get caught up in these selling frenzy because that is when things really get out of control.
Casey Mullooly: So as always, we’re wary of the financial media here, it’s more entertainment and like I said, in the beginning definitely should not be viewed as investment advice. So our best recommendation for how to deal with it after you have the kind of knowledge of what they’re actually talking about, the best way to deal with that, turn it off completely.
Especially when things are hectic in the market like they are right now, they don’t have your best interest at heart. If you’re our client or interested in becoming our client, we are fiduciary investment advisors, we always have to act in your best interest. So if you have questions or concerns, that’s why we do these podcasts, videos and blog posts. But if you want more personalized investment advice, get on the phone and get in touch with us.
Casey Mullooly: So that’s going to wrap it up for episode 292 of the Mullooly Asset Show. Thank you as always for tuning in and we’ll be back with you next week.