I have started this series of post, “Headlines that make laugh” to discuss how one might determine the quality of financial news, its biases and whether its judgments are based on anything like expertise or knowledge. The questions I ask when I read the financial news are:
(1) How does the writer know or what is the basis of the claims that he makes? Is he an expert?
(2) What are the writers biases? Does he have an ax to grind? Is he promoting a false narrative? (Such as” Obama saved Egypt from the tyrant Mubarek”)
Let’s consider this headline about Petrobakken which I follow because I own shares:
The headline focuses on a negative point and the Thomson Reuter’s article begins: “Canada’s PetroBakken Energy Ltd said fourth-quarter production fell 9 percent due to operational delays and natural production declines from wells.” Now this is interesting. It is a negative headline, and one would assume that the author doesn’t like Petrobakken and he wants to see the shares plummet. Perhaps his real agenda is a hatred of the Canadian oil industry, so he wants to bad mouth it. Or perhaps, because the author of the Thomson Reuters article is the world’s export on petroleum companies, he’s decided to highlight the press release’s most salient point, cutting through all the crap in the report which was full of bewildering statistics, numbers and assertions. So we really must congratulate Thomson Reuters for having such perceptive writers!
Many other headlines that I read focussed on something a teensy bit more positive (e.g., Marketwire): “PetroBakken Replaces 274% of Production and Increases Reserves by 18% in 2010”, but of course, this headline is coming straight from the company press release, so this is the “propoganda” that the company wants to present, spinning bad news into good. Or perhaps, the press release focuses on the 274% production replacement and 18% reserve, because these are the really important numbers which affect the long term prospects of the company.
Who knows? In any case, the two headlines have two different effects on the reader: One is intended to be decidedly negative with the intent of forcing the share price down; the other is decidedly positive whose authors hope to give the share price a boost. The DIY investor must never discount bias in the sources of information at his disposal. Many would say it is necessary to read between the lines of press releases and of course this is true. But I wouldn’t put it past Thomson Reuters to attempt through their headlines to hurt the evil Canadian oil industry—what with their carbon footprint and oil sands which is “dirty oil”. See what I mean?