Investing Secrets – When ‘Feelings’ Trump Facts, Investors Lose Money

By Alan Steel

So here’s one of today’s headlines designed specifically to scare the shit out of anyone who reads it:

Britain Could Be Heading for Recession as Business Confidence Drops at Fastest Pace in Seven Years, Economist Warns…

It also wins a dishonourable mention for wordiness.

But is it true?

Well, the clue comes after the comma, so to speak: “Economist Warns.”

In short, remember to be wary of any field of study in which two people can get a Nobel Prize for saying exactly the opposite thing.

And in terms of their ability to predict the future, basically God created economists to make weather forecasters look good.

Now, the reality break about the article that followed that apocalyptic headline (above) is that; while optimism has clearly been shown as low, it also revealed something else; something far more important.

Total output among over 500 manufacturers surveyed in the Chartered Business Institute’s (CBI’s) Industrial Trends Survey has increased at the fastest pace for two years.

Hmmm…..that doesn’t sound so bad.

In fact, that sounds pretty impressive.

But they don’t tell you that little factoid until you’ve drowned in five paragraphs of some economist’s Armageddon-stirring suggestion that poor sentiment “adds to evidence that the economy is heading towards recession.”

Yep, sounds like market feelings are once again attempting to trump market facts.

It’s like watching the Dow Jones rise 10,000 plus points over the last seven years to all time record-breaking highs, as investor sentiment remains at March 2009 levels, and then telling everyone that the economy is heading towards the tank.

And about those economists with diametrically opposed views: If you read through three colourful pictures and 15 more paragraphs of this little ditty you’ll find they’ve got another economist who tells you the exact opposite.

Rain Newton-Smith, the CBI’s chief economist, said: ‘Manufacturers picked up the pace over the second quarter, with output growing solidly. We’re also seeing encouraging signs of a boost to export competitiveness from a weaker sterling.”

And then he reverts to all those dour feelings: “But it’s clear that a cloud of uncertainty is hovering over industry, post-Brexit. We see this in weak expectations for new orders, a sharp fall in optimism and a scaling back of investment plans.”

Uncertainty, expectations and falling optimism? Get a grip…..of the facts.

Folks, we don’t need yet another article picking the scabs of negative sentiment.

Because when feelings trump facts, investors lose money.

You’re better off ignoring that guff.

Get some good advice instead.

After all, it’s your money.

Want to know more?

Check out HNW Magazine’s Investing Secrets of Self-Made Millionaires section here.

And look out for our forthcoming report The 7 Investing Secrets of Self-Made Millionaires out soon.

Alan Steel 300 x 289

Alan Steel is Chairman of the award-winning investment firm Alan Steel Asset Management based in Linlithgow, Scotland.

Read more at www.alansteel.com or his personal blog Points of Few at AlanSteel.tumblr.com

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