Column:

Media controls the market game

By Jacob Houska

Published Dec. 4, 2008

If you handed $700 of student loan money to a chimpanzee, it would probably find a better place to put it than I did.

I put my money in the stock market. Despite losing about a quarter of my net worth, I did manage to take away several pieces of valuable information, the most important being how impossible it is to find any rhyme or reason to the market's many patterns. Or, rather than being impossible, it is perfectly unpredictable, because no matter what, you can still get burned even if you play the odds perfectly.

To make things even more difficult for investors, there are laws against knowing inside information about how the market is going to behave. Basically, as I understand the law, insider trading is the market equivalent of being able to count cards in a game of blackjack. If you know you're going to win, then there are going to be rules to make sure you lose. Just ask Martha Stewart or Mark Cuban about how serious those laws are.

But perhaps the most valuable lesson I learned by throwing away $150 (to date) is that the media has an unbelievable amount of influence on everything it touches, notably the stock market. It seems journalists find a way to get their greasy little fingers on everything in this country.

When Yahoo! Finance reported that Wells Fargo was buying out Wachovia, the story prompted enough people to invest in the stock to increase its value from $3.93 per share to $6.38 in less than an hour. For those who aren't familiar, that is astronomical growth and extremely rare. I ended up making a considerable amount of money on that one, but I owe it to none other than luck.

The information I used to make a quick chunk of change was reported on one of the highest-trafficked Web sites in the world. It couldn't have been that big of a secret, and I certainly wasn't the only one to see the article.

But, on the other hand, what if the Yahoo journalists were wrong? People would still have assumed they were right and would still have bought the stock, causing its price and demand to rise. But the actual company could have avoided any kind of change or buyout that was reported, but the same result would have followed.

This means that the media can directly influence massive amounts of money on a global scale, and can make money through increased readership in doing so. And the ability to influence the global flow of money, whether it's done on purpose or not, is still an incredible power that journalists must recognize and take responsibility for.

Aside from this scary fact, there are still those who remain confident they can consistently predict the performance of the stock market. Stockbrokers make a hefty living off of it.

They all might have been extremely advanced in their field of understanding the economics of the market, but one fundamental truth has remained constant that any layman can understand. If the market is low, it will be back up some day, and if the market is up, it will be low again some day. Knowing this can help anyone, regardless of investment level or understanding of the market, to make money.