Outstanding Financial Pornography

I’m so giddy! No, not because it’s Thursday, silly. Want to know why? Because I can FINALLY use this picture I had so masterfully crafted over a year ago (yes, I am highly artistic as you can clearly see). The problem with this image was that when I created it, the market was red hot. Then it kept on getting hotter. I didn’t feel like I could use this and write until the markets started tumbling. And tumbling it has in the past week. The timing couldn’t be more perfect. So come join me for a pleasant introduction to financial pornography.


I honestly couldn’t be happier that the markets have been sagging. Yes, my own investments are all down, but I get to finally use my art. Yes… art. Please take another gander at that truly horrendously-weird breathtaking visual I have created, just for you. That is what the world of finance looks like to me. Now especially more than ever. So, what is this post about aside from the scantly clad models framed around a bunch of dollar bills?

Models – like the ones featured above – are not true representations of the human species. The vast majority of people do not look like models. Ergo, models do not truly represent what a human being actually looks like.

In short, human beings depicted in the media through models/actors/beautiful people are not an accurate portrayal of the human race. It is a façade.

And just like models are not a true representation, neither is most financial news.

THE ZOMBIE APOCALYPSE IS UPON US

Well, the markets have been falling recently. Oh, you didn’t know? Just yesterday, Sam over at Financial Samurai was (half?) joking on Twitter about buying supplies from his local Home Depot to build his end-of-the-world-apocolypse-bunker:

Outstanding Financial Pornography Financial Samurai

In all seriousness though, no the world is not ending.

EXAMPLES OF FINANCIAL PORNOGRAPHY

You may have heard people whispering about the dreaded VIX index – the stock market fear index. It measures the volatility of the S&P 500 and when the VIX index is trending up, it supposedly means trouble is brewing.

Outstanding Financial Pornography VIX

And with headlines like this from Forbes:

Outstanding Financial Pornography Forbes 1

Or headlines like this from CNN Money:

Outstanding Financial Pornography CNN

You might be led to believe that there is something terribly wrong with the markets and that the zombie apocalypse is nigh.

Now, don’t get me wrong, I too like to (very often actually) fantasize about the zombie apocalypse. I daydream about how I would crossbow zombies square in the head with my badass crossbow just like Darrel from The Walking Dead (minus the raging racist 1 armed bigot brother). But that is fantasy. Make believe. However, what is depicted above is suppose to be the news. And they craft it to grab your attention and scare the hell out of you like The Walking Dead.

This is financial pornography at its best. Rather than educating, useless fear-mongering and noise is broadcast to the masses.

BACK TO REALITY

Patrick O’Shaughnessy over at Millennial Invest had a great post about what you need to focus your attention on (and it is not the mainstream financial news). He showed the following 2 graphs. This first one depicts the monthly returns of the S&P 500 since 1871:

Outstanding Financial Pornography Chart 1

Whoa! Look at all that volatility! Ugh, I can’t stomach that! Get me and all my money into a  savings account right now!

Oh, but wait: there’s more. That graph above changes drastically once you take the monthly returns and compound them throughout the years:

Outstanding Financial Pornography Chart 2

If you’re invested for the long haul in the stock markets, market volatility and its random fluctuations should be of no concern to you. None of it matters except that you stay the course for decades.

IN CONCLUSION

In conclusion, just as models are poor representations of the human species, financial pornography is a very poor representation of useful financial knowledge.

I will leave you with this image of the infamous 1979 Business Week cover titled “The Death of Equities”

You know what happened after 1979? The start of the greatest bull run the stock market has ever seen. So tune out the noise. Don’t get scared by Jim Cramer. Don’t take advice from pundits on CNN Money. Take advice from J. Money instead on why you should just ignore everything. Seen any good financial pornography recently?

36 thoughts on “Outstanding Financial Pornography

    1. I think my favorite is the male model with the baseball glove strategically placed around the crotchal-area 😛

      Hehe so you want people panicking and selling off so you can swoop in an get deals? I mean this post was suppose to be a deterrent for that kind of action but for you, I’ll make sure it doesn’t go viral or anything 🙂

  1. Back around 2008 when the markets crashed, I freaked out. I have learned a lot since then, but I always wondered if my mind would really be in the right place once the markets took a big dump.

    Yesterday, I found myself logging into my 401k site to bump up my contribution rate. Yes!

    So please, keep freaking out people. Mr. Market, go down another 5% or 10% or even 15% and stay down a bit so I can buy, buy, buy.

    1. I’ve read so much over the years before I started even dipping my toes into investing that I learned *in theory* what not and what to do during market ups and downs. I’m fairly good at detaching my emotions from invested money, but it sure helps that I don’t really need any of that invested money anytime soon.

      Haha and as much as the wise try to preach (and by the wise I mean like Buffett, not me!) not to freak out – people inevitably always freak out. So I don’t think my pontificating here will change that at all really – so you’re in the clear to swoop up all you can as the market gets depressed 😀

  2. I believe Sam was 57% joking.

    Very nice post. I generally recuse myself from discussions of the equity markets and exchanges — for obvious reasons — but yes, equities and related products are a useful addition to many people’s retirement portfolios

    1. I thought it was more like 57.8273%???

      That reminds me Mario, I forgot to add in my multiple disclaimers whenever I talk about the markets:

      1) Past performance is no guarantee of future results
      2) I am not a certified financial professional licensed to give out investment advice.
      3) Kapitalust is intended for purely public broadcast and does not pertain to anyone’s unique financial situation and information on Kapitalust should not be taken as financial advice for any individual and their financial needs.
      4) Your mileage may vary.
      5) Equities are risky and my blathering on this website should be taken as strictly for entertainment purposes.

      Hmmm… have I covered all bases? 😛

  3. I will just continue adding capitals and get more equity. I don’t need the investments any time soon so the latest market dip is actually a welcomed event.

  4. Steve,

    The next Picasso is upon us!! 🙂

    I wear earplugs all the time. So ignoring the noise is my specialty. Of course, I’m always asking people to repeat themselves, so maybe I should rethink this strategy.

    My only issue right now is figuring out where I’m going to get a second job so that I have even more capital to deploy!

    Best wishes.

    1. I was thinking more like the next Leonardo 😉

      Emotions are such a powerful force that no matter how much rationality and logic is preached, it seems to have little effect on herding behaviour and letting emotions control important decisions.

      It is all very fascinating as I’d really like to understand why markets gyrate so much when people should know better than to let emotion drive their investing behaviour. I guess we have a far ways to go in evolution before we can evade the reptilian side of our brain.

      As always, thanks for dropping by my humble little site 😀

  5. Haha what a great post! I think your art is great. I have been hearing all the rage, but because I have very little invested because I’m working on the debt first, I’m not all that bothered. It will be interesting how my mindset shifts once I get rid of debt and focus more on investing. I think I would freak out, but I’ve heard that successful investors need to just ride it out! Yeehaw!

    1. Was Romeo-6-pack-baseball-glove-over-the-crotch a favourite of the artwork?? 😀

      What really helped me to become comfortable with market fluctuations/gyrations/volatility was to read and learn as much as I could about investing and market history during my ~2 years of debt repayment (where I focused exclusively on debt repayment).

      That helped me to understand what to expect and plan accordingly for investing now and moving forward!

  6. You are too much man, haha… love it. And much more entertaining than my “ignore everyone” post I similarly did this week as well. Though I accidentally timed it right as all stock hell broke lose like the day after, haha…

    Clever post – my new favorite from you 🙂

    1. I totally forgot to add your post as a reference – it was a motivation/inspiration for mine! Aaaaand fixed!

      Thanks for dropping by J. Money, the pleasure is all mine! 😀

  7. Ha, thats quite the graphic up there! I think its funny to watch the way people freak out when the markets have a small downturn – and in the long run this is in fact a small downturn. I feel sorry for anyone who freaked out and sold (for a loss)

    1. At least while we are alive, the human creature is still ruled primarily by emotions and the more primitive parts of the brain, so I don’t think we will ever have a shortage of people freaking out when we all know they shouldn’t in the markets.

  8. Great post, Steve!

    The last two graphs clearly show what it’s all about: the current volatility doesn’t mean a thing. It’s all about people not being able to restrain their emotions.

    Does it make sense that some companies 10% of their value in a month’s time just because of some newspapers posting troubling news? No, not at all. That’s why we also shouldn’t care about it too much.

    Time to invest some more in the market!

    Cheers,
    NMW

    1. That is what fascinates me the most about life in general – life is actually really really simple but none of us can seem to make it simple. In fact, most of us struggle to keep it simple. I should totally have stuck with psychology in university!

      “Only when the tide goes out do you discover who’s been swimming naked.” 😛

  9. Wow, that is some… art. I think the best part is that you held onto that incredible creation waiting for just the right moment. I choose the long term view–not healthy for me to get caught up in the mercurial fervor of the daily markets. I prefer to pet Frugal Hound and dream up new costumes I can dress her up in… (much to her chagrin).

    1. Haha thanks for coming back after I inadvertently deleted your original comment – let’s blame Akismet 😛

      I have been waiting and waiting with that picture and my wife has asked me so many times when I was actually going to use it. I’m glad patience paid off!

  10. Not sure whose job is harder, weather forecasters or stock market analysts. I haven’t even looked at my portfolio since the tumble. It’s still there and there’s nothing I’m gonna do about it anyways. Very creative interpretation.

    1. What we should all do is to panic whenever markets get volatile and sell all our investments. Then buy all our investments back once the market has fully recovered, at the top of a bull cycle. This is the true path to financial freedom (please refer to my disclaimer: you cannot sue me for taking this advice) 😀

  11. As Warren Buffett says, “You want to be greedy when others are fearful. You want to be fearful when others are greedy.” After all, if everybody’s doing one thing (like taking the advice of the financial mass media), there’s going to be value in doing the opposite. Great post!

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