Can You Trust the Mainstream Investment Media?

• Irrelevant and misleading most of the time
• What's the issue?
• The Wall Street Journal Goofs
• Harmful for your wallet

I normally don't care to write about the mainstream media - for the very reason that it's almost always wrong or irrelevant when it comes to commodity news.

So today I thought I'd talk about some specific reasons why I think you, the individual investor, would be best advised to ignore most of what you hear from the mainstream media.

In my travels as a daily newsletter editor, I listen, read, watch and seek out a variety of news sources both ordinary and arcane.

Most of the time, I'm simply amazed at the low-caliber quality of reporting in terms of accuracy, tone and general knowledge on the part of the offending reporters.

Usually, the message being relayed is entirely irrelevant, or worse, misleading.

My favorite example is something that I hear some afternoons on National Public Radio's program “Marketplace.” This program professes to have an “intelligent and sophisticated approach to the subject of business.”

Each afternoon, Kai Rysdall - the program's host - announces the latest financial news in a segment called “The Numbers.”

According to the Marketplace website:

“Marketplace listeners know that when they hear "Stormy Weather," the Dow Jones Industrial Average, NASDAQ and Standard & Poor's 500 are all down. When they hear, "It Don't Mean a Thing (If It Ain't Got That Swing)" those indexes are mixed -- some up, some down. And when "We're in the Money" comes on, the indexes are all up.”

(You can listen to samples of all of these songs by clicking here.)

So what's the problem?

As any reasonably seasoned long-term investor knows, one day changes in the stock market are beyond irrelevant. It would be much more useful to have music that reflected a 200 day moving average - at the very least. I'd be more interested in a 2 year moving average.

For a program that professes to provide an “intelligent and sophisticated approach to the subject of business”, the very idea of cheerleading one day gains and mourning one day losses just smacks of hypocrisy.

It's not sophisticated or intelligent. It's the lowest common denominator.

Okay, so everyone knows that NPR and its programs are pretty lightweight when it comes to hard-hitting news and insight...

But what about a more heavyweight mainstream media source like The Wall Street Journal?

While I believe The Wall Street Journal is still a generally solid business and investment news publication, there's little question that it's on the long path towards irrelevancy.

I know at least one huge commodity trading group in Chicago that cancelled their subscriptions to the Journal a few years ago.

I can't reveal my source, but they currently advise Archer Daniels Midland ADM as just a small sample of their reach.

But just take a look to the right at the screen-grab of the Journal's commodity news page this morning. Among their top stories is the revelation that “Gold Falls Below $1,400” as well as the headline that “Gold Stays Above $1,400.”

I know these two opposing headlines are likely the product of reader interest, but how can both of these stories still be top news? One or both of them is wrong. It's more likely that both are irrelevant. $1,400 is just a psychological barrier for gold. You wouldn't see a headline about $1,401 or $3,837 gold. The idea that gold is above or below $1,400 an ounce is completely irrelevant to any actual news about gold.

Okay, so the above two news outlets are just examples of irrelevancy. I can forgive - or better yet - ignore irrelevancy.

But from an investment perspective, I've found something much, much more malicious.

I'm referring to the variance between stock research portals with regard to even the most simple and straightforward number: the earnings per share.

I'll use Exxon-Mobil XOM as an example. Exxon is one of the largest corporations in existence. If we can't trust common stock research portals like Yahoo! Finance, Google Finance or Bloomberg to accurately give us the correct earnings per share for Exxon, then we probably shouldn't trust any other numbers we get, especially for smaller more speculative companies.

Right now, Yahoo! Finance (NYSE: YHOO) has Exxon's trailing year earnings per share listed as $5.65.

For the same metric, Google (NYSE: GOOG) finance has $5.64.

And Bloomberg has $5.68.

Now, these numbers are only off by a few pennies. That won't change the Price-to-Earnings ratio all that much. It probably won't make a difference for long term investors. But the question is: what's the real number?

For the real earnings per share number, you have to go to the Securities Exchange Commission website and look up Exxon's latest quarterly reports (their 10Q) and you have to find the actual 12 month trailing earnings per share.

Exxon filed their last 10Q on November 3, 2010.

That 10Q only contains earnings information for the first three quarters of 2010. So you have to look at an older 10Q or a 10K (annual report) to find out the last quarter of 2009 and then add that number to the trailing nine months earnings per share found in the most recent 10Q.

I'll save you the legwork. According to the actual earnings report filed with the SEC, Exxon's one year trailing earnings per share was $5.64.

So this time, Google has the right number. But I can tell you that sometimes Google is wrong too.

And my point isn't that Google is better than Bloomberg and Yahoo, or visa versa. My point is that if you're going to be a successful investor, you need to do this type of research for yourself.

You can use these stock portals as a good jumping off point, but before you pull the trigger and put your hard-earned money at risk, you should find out the real numbers. Learn to read a 10Q, and you'll be in a better position to succeed as an investor than 95% of the public.

It's really the only way to invest responsibly.

If you have any questions about reading these earnings reports or finding out which ones you should be looking at in the first place, please don't hesitate to drop me a line at editorial@resourceprospector.com.

Good investing,

Kevin McElroy

Editor

Resource Prospector

disclosure: Long Exxon. No other positions.