Your Money & Your Life
Talking Heads
I’d like to take a few minutes to follow up on my previous article about depending on others for investment advice.
Today’s title originated in television production and was defined in TV Guide magazine as a head-and-shoulder shot of a person talking—"all content, no action.” Unfortunately, that sounds a lot like what I encounter so often these days: TVs tuned to CNBC with people who sound authoritative explaining what is about to happen in investment markets and why. Interestingly, I have yet to see any follow-ups unpacking why their expert advice so frequently doesn’t work out as intended.
Perhaps I’m the only one in the room who remembers the very first investment-related group of talking heads: Wall Street Week with Louis Rukeyser. The program aired once a week on PBS from 1970 to 2002. It featured 60 minutes of market commentary, interviews, and stock picks. Remember, these were the days when ticker-tape stock quotes had just been phased out, having been leading-edge technology since the early 1900s.
In contrast to today’s 24/7 cycle of investment news, the program gave viewers time for thoughtful analysis rather than constant noise. When I was a stockbroker in the late 1990s, it was quite common for customers to call or come in early in the week to discuss what they’d heard on the show over the weekend and gather more information about topics—and specific investments—that were mentioned. Reflecting on that first investment job, let me add that, while I did have desktop computer access to stock prices, my office had been set up at the time when a ticker tape ran from a teletype machine, through the individual offices, and into a large waste basket.
There are, of course, as many ways of picking stocks as there are stock pickers, but a couple of techniques seem to have staying power: fundamental analysis and technical analysis. The first is easy to understand. If the company in question has strong fundamentals, such as well-liked products that are difficult to source elsewhere, financial strength, a history of successful research and development, and strong management, it might (or might not) rise in value. Technical analysis is a method of evaluating securities by analyzing price movements, trading volume, and chart patterns, rather than relying on company fundamentals. It assumes that all relevant information is reflected in market prices and that historical trends can help predict future price behavior. Again, the strategy might or might not work.
Whether the system is fundamental, technical, or mystical in nature, a question always strikes me: if someone had a truly foolproof method for buying (and selling) stocks or bonds—or real estate, or really anything—why would they share it by becoming a talking head? Thinking back to Rukeyser’s show, I remember reading an article that attempted to answer that question, although even with Microsoft’s Copilot AI conducting the research, I can’t confirm the exact quote.
Here’s my best recollection of the answer:
- He wants to attract clients or build credibility for his advisory business (or said another way: He’s already rich, now he wants to be famous.)
- He wants his grandkids to see him on TV.
- He owns the stock and wants someone to buy it from him.
Let’s expand on that third answer just a bit. Studies by DALBAR, Vanguard, and Morningstar show that mutual fund investors often earn less than the funds themselves—typically 1% to 1.5% less annually—because they tend to trade in and out at the wrong times.
This research echoes lessons from a slim volume published by professional dancer Nicolas Darvas in 1960. The book, How I Made $2,000,000 in the Stock Market, tells the story of how he became a successful, self-taught investor, amassing a fortune in the stock market. One of the central themes in the book is Darvas’s dawning realization that he was making more money when he communicated with his broker via occasional telegram while touring internationally, rather than being able to call anytime when he was in New York. The delay forced him to be more disciplined and less reactive, which improved his investing results. In fact, he eventually instructed his brokers to communicate only by daily telegrams even when he was living in New York.
I think there’s a lesson here for all of us. As Darvas, Dalbar, and others have found, trading too frequently (perhaps on the advice of one of those otherwise unvetted talking heads), is more likely to lead to poorer returns than charting a strategy—monitoring it carefully, of course—and sticking to it.
Warren Ward, CFP®
Senior Investment Advisor
To learn more about Warren or read his previous articles, visit his profile page here.
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