Investors need to understand how to sort the realists for the rest as the media spews out stories talking up money making opportunities.
Experienced investors will know that any market is split between real opportunities and the rest, generally middlemen extolling the virtues of commodity or product because they will make money from sales or movements in the market.
Take the US property market. Survey after survey comes out confirming prices are rising, buyers are looking for homes and mortgages are becoming more available.
Before falling hook, line and sinker for the sales pitch, look at who is making the claim, what they are saying and why.
A lot of house price data in the US – and anywhere else for that matter – comes out of realtors or estate agents.
Talking up the markets
It’s in their interests to talk the market up because they make their money selling property.
Look at the figures and many are the dreaded sentiment surveys.
A sentiment survey is not based on any foundation of data, but is merely the opinion of those asked the questions.
For instance, if the article says something like 15% more realtors this month feel house prices are rising, that means in their opinion they can get more money for a house now than last month.
The same applies to market surveys like technology stocks, precious metals, emerging markets and the hundreds of other sub-markets someone is trying to sell a stake ion to an investor.
One of the main factors to keep in mind when someone is pitching an investment is what are they getting out of it and why are they pushing it?
One of the favourites is economic reports from investment houses.
Due diligence
These reports talk about rises and falls in prices and the commentator’s opinion of why they are shifting.
Some of these industry gurus are paid a lot of money to give these opinions and spend a long time studying to become market analysts or economists.
But the truth is they have no more clue than anyone else of how the markets will move.
If they could foretell the future, they would not ply their trade for another organisation, but would have their own secret money-making set-up generating a flood of wealth.
The truth is most surveys, reports and forecasts are simply tools for gaining free advertising in the media.
Believe them at your peril and never let go of any cash before carrying out your own due diligence into what these commentators are saying.
